This paper empirically examines the dynamic relationship between two short-term interest rates namely, repo rate (official) and call money rate (unofficial) during the full-fledged working of the liquidity adjustment facility in India. Using daily data, the study finds a strong relationship between the two rates in the long run and short-run, through cointegration tests and Error Correction Mechanism (ECM) respectively. The ECM and Granger causality test results reveal the bi-directional causality between the two rates in the short run and unidirectional causality from official to unofficial rate in the long run. The paper also examines the transmission of monetary policy impulses from official rates to unofficial rates and vice-versa. The Impulse Response Functions result shows that, in the short run, the interest rates responds to shocks to itself and other variables in the system, suggesting that monetary policy impulse can be efficiently transmitted to other financial markets.

(2008). The monetary policy transmission from official rate to unofficial rate under liquidity adjustment facility in India [journal article - articolo]. In SAVINGS AND DEVELOPMENT. Retrieved from http://hdl.handle.net/10446/27411

The monetary policy transmission from official rate to unofficial rate under liquidity adjustment facility in India

2008-01-01

Abstract

This paper empirically examines the dynamic relationship between two short-term interest rates namely, repo rate (official) and call money rate (unofficial) during the full-fledged working of the liquidity adjustment facility in India. Using daily data, the study finds a strong relationship between the two rates in the long run and short-run, through cointegration tests and Error Correction Mechanism (ECM) respectively. The ECM and Granger causality test results reveal the bi-directional causality between the two rates in the short run and unidirectional causality from official to unofficial rate in the long run. The paper also examines the transmission of monetary policy impulses from official rates to unofficial rates and vice-versa. The Impulse Response Functions result shows that, in the short run, the interest rates responds to shocks to itself and other variables in the system, suggesting that monetary policy impulse can be efficiently transmitted to other financial markets.
articolo
2008
L’article analyse les relations dynamiques entre deux taux intérêt de court terme, l’un officiel et l’autre non officiel quand les mesures d’ajustement de liquidité en Inde étaient en cours. En utilisant des donnés journaliers, l’étude démontre une relation forte entre le deux taux, une relation bidirectionnelle entre le deux dans le court terme et une relation unidirectionnelle de l’officiel au non officiel dans le long terme. L’article analyse aussi la transmission des impulses de la politique monétaire des taux officiels aux taux non officiels et démontre que dans le court terme les impulses peuvent être efficacement transmis aux autres marchés financiers.
Padhan, PURNA CHANDRA
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/27411
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