A policy rate channel testing monetary policy transmission mechanism

Malik, Firdous Ahmad, Das, Deepanjali, Janjua, Laeeq Razzak and Adam, Hebatallah (2023) A policy rate channel testing monetary policy transmission mechanism. International Journal of e-Business Research, 19 (1). pp. 1-16. ISSN 1548-114X

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Against the backdrop of invariant financial and economic reforms, there are presumptive changes in the confines and speed with which target variables respond to Reserve Bank of India (RBI) policy signals. The result of transmission lags from monetary policy to the real sector is unmistakable. The empirical approach used in this study is a natural progression from the VAR model videlicet, co-integration, and error correction techniques used to overcome the problem of spurious regression associated with non-stationary time-series data. After a shock induces disequilibrium, the speed and degree of adjustment return to a balanced state but with some time lag. The results indicate that in the two-step verification model, it takes approximately 2.851 months for WACMR to fully respond to a change in policy rates, whereas in the second step, it takes approximately 10.33 months for base rates to reach their complete pass-through following changes in call money market and deposit rates.

Item Type: Article
Keywords: Cointegration | Monetary Policy Transmission| Mechanism | Structural Breaks | Weighted Average Call Money Rates
Subjects: Social Sciences and humanities > Social Sciences > Social Sciences (General)
JGU School/Centre: Jindal School of International Affairs
Depositing User: Amees Mohammad
Date Deposited: 13 Feb 2023 05:08
Last Modified: 23 Mar 2023 04:43
Official URL: https://doi.org/10.4018/IJEBR.317887
URI: https://pure.jgu.edu.in/id/eprint/5578


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