The effect of liquidity shocks on the bank lending channel: Evidence from India

Mishra, A and Burns, K 2017, 'The effect of liquidity shocks on the bank lending channel: Evidence from India', International Review of Economics and Finance, vol. 52, pp. 55-76.


Document type: Journal Article
Collection: Journal Articles

Title The effect of liquidity shocks on the bank lending channel: Evidence from India
Author(s) Mishra, A
Burns, K
Year 2017
Journal name International Review of Economics and Finance
Volume number 52
Start page 55
End page 76
Total pages 22
Publisher Elsevier
Abstract Using a structural VAR framework and unique bank liquidity index, this study builds a short run model to analyse dynamic interactions among monetary policy, bank liquidity, and bank lending in India. We find that monetary policy shocks have strong initial and persistent impacts on bank lending, while liquidity shocks impact bank lending after a 9-month lag. We also find evidence of an indirect feedback channel between monetary policy and bank lending operating through changes in bank liquidity. However, the indirect effect of monetary policy on bank lending (through bank liquidity) operates with a lag of roughly 6 to 9 months.
Subject Macroeconomics (incl. Monetary and Fiscal Theory)
Keyword(s) Liquidity index
Monetary policy shocks
SVAR
DOI - identifier 10.1016/j.iref.2017.09.011
Copyright notice © 2017 Elsevier Inc. All rights reserved.
ISSN 1059-0560
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