Monetary Policy, Interbank Liquidity and Lending Behaviour of Banks in India

Ansari Md Gyasuddin () and Rudra Sensarma
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Ansari Md Gyasuddin: Indian Institute of Management Kozhikode

No 442, Working papers from Indian Institute of Management Kozhikode

Abstract: In this paper we investigate the role of interbank liquidity in monetary policy transmission in India. We employ standard and dynamic panel regression methods to analyze data for 40 commercial banks during the period 1999-2018. We find a significant role of interbank liquidity in easing the negative impact of monetary policy tightening on bank lending. We also find heterogenous role of interbank liquidity in monetary policy transmission across public sector and private sector banks. The policy implication for the monetary authority in India is that managing net liquidity positions of banks is necessary to realize the desired effects of monetary policy.

Keywords: Monetary policy transmission; Interbank Liquidity; Bank Lending. (search for similar items in EconPapers)
Pages: 23 pages
Date: 2021-03
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:iik:wpaper:442

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