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Bank Lending and Monetary Transmission: Does Politics Matter?

Saibal Ghosh ()
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Saibal Ghosh: Qatar Central Bank

Journal of Quantitative Economics, 2020, vol. 18, issue 2, No 5, 359-381

Abstract: Abstract Combining bank-level data with information on interest rate subvention, the paper documents an expansion in agricultural lending and a reduction in interest costs even under tight monetary policy, in the presence of political intervention. The magnitude of the impact is asymmetric across periods of monetary expansion and contraction. The analysis highlights the importance of the government in the functioning of the credit market and uncovers a political channel of monetary transmission.

Keywords: Interest rate subvention; Bank lending; Monetary policy; India (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s40953-019-00190-y

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Handle: RePEc:spr:jqecon:v:18:y:2020:i:2:d:10.1007_s40953-019-00190-y