Can Central Banking Policies Make a Difference in Financial Market Performance in Emerging Economies? The Case of India

Gagan Sharma (), Mandeep Mahendru and Mrinalini Srivastava
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Mandeep Mahendru: Department of Management, ICFAI Business School, Haryana 122016, India
Mrinalini Srivastava: University School of Management Studies, Guru Gobind Singh Indraprastha University, New Delhi 110078, India

Economies, 2019, vol. 7, issue 2, 1-19

Abstract: This paper explores the importance of central banking policies in financial market performance, using the case of India. For this purpose, the paper comparatively analyzes the performance of financial markets during the regimes of last three governors of the Reserve Bank of India—Y V Reddy, D Subbarao, and Raghuram Rajan. The paper discusses the central banking policies in these periods with respect to monetary stability, inflation, and growth challenges. The paper presents an analysis of returns and volatility in stock markets and currency markets in their tenures in comparison with those from other selected emerging markets (Brazil, Russia, China, South Africa) and developed markets (USA and UK). The paper also brings out the leverage effect by applying the exponential generalized autoregressive conditional heteroskedasticity (EGARCH) model in addition to comparatively analyzing the performance of financial markets. Further, the paper assesses the impact of central banking policies on financial markets by using the fixed effect model on the reference countries for the period under reference.

Keywords: central banking policies; macro-economic management; financial markets; monetary stability; inflation; growth challenges (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2019
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