Do foreign banks in India respond to global monetary policy shocks? A SVAR analysis

Shareef, Ameen Omar and Prabheesh, K.P. (2021) Do foreign banks in India respond to global monetary policy shocks? A SVAR analysis. Studies in Economics and Finance, 38 (2). pp. 303-316. ISSN 1086-7376

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Abstract

his paper aims to examine the role of foreign banks in transmitting global monetary policy shocks to India. Further, the authors try to explore the international bank lending channel and analyze the impact of global monetary policy on Indian macroeconomic variables. Design/methodology/approach: The authors use a structural break unit root test and structural vector autoregression on monthly data from 1998 to 2018. Findings: The study finds that the global monetary policy is significantly determining foreign banks’ lending in India; the evidence of a portfolio re-balancing channel in the process of global monetary policy transmission to the Indian economy; the exchange rate is significantly explaining the foreign bank credit dynamism in India; and evidence of international monetary policy spillover to the Indian economy. Originality/value: This is the first attempt to analyze the role of foreign banks in the transmission of global monetary policy shocks to India, where the literature availability is limited. The finding of ineffective domestic monetary policy on foreign bank lending opens the need for an in-depth and diversified analysis of the role of foreign banks in the transmission of domestic monetary policy.

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IITH Creators:
IITH CreatorsORCiD
Shareef, Ameen OmarUNSPECIFIED
Prabheesh, K PUNSPECIFIED
Item Type: Article
Uncontrolled Keywords: Foreign bank; Foreign bank credit; Monetary policy spillover; Monetary policy transmission
Subjects: Social sciences
Social sciences > Social Services
Divisions: Department of Liberal Arts
Depositing User: . LibTrainee 2021
Date Deposited: 13 Jul 2021 07:11
Last Modified: 13 Jul 2021 07:11
URI: http://raiith.iith.ac.in/id/eprint/8271
Publisher URL: http://doi.org/10.1108/SEF-10-2019-0417
OA policy: https://v2.sherpa.ac.uk/id/publication/32400
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