Implications of bank ownership for the credit channel of monetary policy transmission: Evidence from India |
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Authors: | Sumon Kumar Bhaumik Vinh Dang |
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Institution: | a Aston Business School, Aston University, Birmingham B4 7ET, United Kingdom b USAID/Vietnam Competitiveness Initiative, Prime Centre Building, 53 Quang Trung Street, Hanoi, Vietnam c Department of Economics and Finance, Southern Illinois University Edwardsville, IL 62026, USA |
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Abstract: | Using bank-level data from India, we examine the impact of ownership on the reaction of banks to monetary policy, and also test whether the reaction of different types of banks to monetary policy changes is different in easy and tight policy regimes. Our results suggest that there are considerable differences in the reactions of different types of banks to monetary policy initiatives of the central bank, and that the bank lending channel of monetary policy is likely to be much more effective in a tight money period than in an easy money period. We also find differences in impact of monetary policy changes on less risky short-term and more risky medium-term lending. We discuss the policy implications of the findings. |
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Keywords: | E51 E58 G21 G32 |
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