Do capital inflows affect domestic bank credit? Empirical evidence from India

Zeeshan Nezami Ansari, Muzffar Hussain Dar and Shadman Zafar ()
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Zeeshan Nezami Ansari: Indian Institute of Technology
Muzffar Hussain Dar: Aligarh Muslim University
Shadman Zafar: Aligarh Muslim University

Future Business Journal, 2023, vol. 9, issue 1, 1-10

Abstract: Abstract This paper studies multivariate dynamic analysis of capital inflows in relation with domestic bank’s credit which has not been investigated earlier adequately in the context of Indian economy. Using autoregressive distributed lag (ARDL) model, we find the existence of co-integration over the period 1991 Q3 to 2022 Q1. The long-run ARDL regression model results show net equity inflows, i.e. net foreign direct investment, and net non-equity inflows, i.e. foreign loan, are significant to influence domestic bank credit. Result also reveals that depreciation of exchange rate and current account (trade) deficit increase bank credit. Outcome of this research contributes significantly to frame effective monetary policy in the Indian context.

Keywords: Capital inflows; Domestic bank credit; ARDL model; Co-integration; India (search for similar items in EconPapers)
JEL-codes: E51 F33 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1186/s43093-023-00203-6

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