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Monetary policy transmission in India: new evidence from firm-bank matched data

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  • Pranav Garg
  • Saurabh Ghosh
  • Abhinav Narayanan

Abstract

This paper uses a unique firm-bank matched data set for India to provide new insights into the monetary policy transmission mechanism. Our assessment of the bank-lending channel suggests that an increase in credit may have a heterogeneous effect on firms based on the liquidity positions of the lending banks. Investment in fixed assets is found to increase for firms that borrow from liquid banks, when these banks increase their lending. By contrast, we find increased financing of current liabilities – and not increase in long-term investment – for firms that borrow from the less liquid banks.

Suggested Citation

  • Pranav Garg & Saurabh Ghosh & Abhinav Narayanan, 2024. "Monetary policy transmission in India: new evidence from firm-bank matched data," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 17(3), pages 526-542, September.
    • Handle: RePEc:taf:macfem:v:17:y:2024:i:3:p:526-542
    DOI: 10.1080/17520843.2022.2067682
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