Theoretical and Applied Economics
No. 3 / 2021 (628), Autumn
Effectiveness of monetary policy and interest rate pass-through in India since financial sector reforms
NMIMS University, Mumbai, India
Abstract. This article tries to investigate how monetary policy and interest rate pass-through is effective in India after adequate autonomy was given to commercial banks through financial sector reforms and Banking Sector Reforms. The study uses Milton Friedman and Robert Mundell’s perspectives on the role of monetary policy in achieving internal and external sector equilibrium. For this purpose, the study uses ADF-PP unit root test, Engel Granger’s Causality Test and trend line analysis. The study observed that the monetary policy is effective in influencing major macroeconomic variables like GDP, Exports, Imports and Capital Flows. Similarly, the Reserve Bank’s Lending Rate and Commercial Banks Prime Lending Rates are directly correlated in the entire study period. But the study did not find any causality between money supply with current account deficit and exchange rate lacks significance of monetary policy in the context of automatic restoration in the external sector. The overall conclusion of the study is that the monetary policy is very effective in influencing major macroeconomic variables via strong interest rate pass-through in India even after adequate autonomy was given to Commercial Banking Institutions.
Contents
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Development in Romania during the post-crisis period: A human, economic and social perspective
Multifactorial analysis of the price formation in the terms of a risk-free rate
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Evaluation of the methodological relationship between real business cycle model and macroprudential policy
Efficiency of commercial banks in India after global financial crises
Effectiveness of monetary policy and interest rate pass-through in India since financial sector reforms
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Estimating the relationship between governance, economic growth, inequality and poverty
Environmental Kuznets curve and India: Evidence from autoregressive distributed lag model
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The relationship between exchange rates, foreign trade and economic growth: An application on Turkey