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Unconventional monetary policy measures and money markets: Estimating the impact of targeted repo operations on asset prices

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  • Kamate, Vidya

Abstract

We analyse the impact of unconventional monetary policy measures undertaken by central banks in response to COVID-19 crisis on asset prices in money markets. Using novel primary issue-level data of commercial papers (CPs) in India and a staggered difference-in-differences estimation strategy, we examine the effects of On-Tap Targeted Long-Term Repo Operations (On Tap TLTRO) on CP yields of issuers belonging to the targeted sectors. We find that the repo operations lead to a significant reduction of around 30 basis points in the borrowing costs of targeted sectors’ issuers. The findings highlight the effectiveness of interest rate and bank lending channels of transmission of unconventional monetary policy.

Suggested Citation

  • Kamate, Vidya, 2023. "Unconventional monetary policy measures and money markets: Estimating the impact of targeted repo operations on asset prices," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003665
    DOI: 10.1016/j.frl.2023.103994
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    More about this item

    Keywords

    Long-term repo operations; Unconventional monetary policy; Commercial papers; Policy transmission; Interest rate channel;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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