Research and Publications

Press Release RBI Working Paper Series No. 01 Stock Price Reaction on the Announcement of Basel Implementation: Evidence from Indian Banks Gaurav Seth, Supriya Katti and B.V. Phani@ Abstract * The study evaluates the market reaction to the Reserve Bank of India’s policy decisions related to aligning its domestic banking regulations with global Basel capital adequacy norms. Using event study methodology, the study finds that in the initial phase, the Indian banks were

Press Release RBI Working Paper Series No. 02 Taking Cognisance of Households’ Inflation Expectations in India Devendra Pratap Singh, Aditya Mishra and Purnima Shaw@ Abstract *The paper studies the characteristics of inflation expectations in developed and emerging market economies. We find that the properties of inflation expectations in India share similarities to those in other economies, such as exhibiting weak rationality (by failing both the unbiasedness and eff

Press Release RBI Working Paper Series No. 05 Reassessing Investment Dynamics – Newer Insights into Leverage and Investment of the Indian Corporate Sector Deba Prasad Rath and Sujeesh Kumar@ Abstract * Given the criticality of investment in achieving durable growth in the context of ongoing subdued investment, globally as well as in India, this paper revisits investment dynamics in India from the standpoint of the ‘augmented accelerator’ hypothesis and examines whethe

Press Release RBI Working Paper Series No. 06 An Alternative Perspective on Demand and Supply to Forecast Inflation Saurabh Sharma and Ipsita Padhi@ Abstract *Measuring macroeconomic demand and supply is important for a variety of reasons and is especially useful for gauging inflationary pressures. In this context, this paper departs from the standard Blanchard-Quah technique and proposes a novel identification strategy to extricate demand-supply from the business cyc

Press Release RBI Working Paper Series No. 04 Does Offshore NDF Market Influence Onshore Forex Market? Evidence from IndiaHarendra Behera, Rajiv Ranjan and Sajjid Chinoy@ Abstract*The paper uses a VECM-MGARCH approach to examine the interrelationship between onshore and offshore NDF markets for the Indian Rupee in view of price discovery, mean and volatility spillovers. The empirical results suggest a stable long-run relationship between onshore and NDF markets with p

Press Release RBI Working Paper Series No. 03 Monetary Policy Transparency and Anchoring of Inflation Expectations in India G. P. Samanta and Shweta Kumari@ Abstract * This study provides a measure of the degree of monetary policy transparency in India using text-mining techniques and, examines the impact of transparency on anchoring of inflation expectations. Inflation expectations are sourced from two RBI surveys - Survey of Professional Forecasters and Survey of In

Press Release RBI Working Paper Series No. 02 Regional Economic Convergence in the Manufacturing Sector: An Empirical Reflection Madhuresh Kumar@ Abstract 1 This paper uses data on registered manufacturing from the Annual Survey of Industries (ASI) for the post global financial crisis period (2008-09 to 2017-18) and examines the convergence pattern of 21 major states in India and their key drivers. While poorer states are found to have exhibited convergence to the m

Press Release RBI Working Paper Series No. 01 Monetary Policy Transmission in India: New Evidence from Firm-Bank Matched Data Saurabh Ghosh, Abhinav Narayanan and Pranav Garg@ Abstract *This paper uses a unique firm-bank matched data set for India to provide new insights into the monetary policy transmission mechanism. We first show that monetary policy transmission works with a lag when we focus on bank credit and balance sheet items of firms. An assessment of the bank

Press Release RBI Working Paper Series No. 15 Measuring Trend Inflation in India Harendra Kumar Behera and Michael Debabrata Patra@ Abstract *Central to monetary policy is the concept of trend inflation to which actual inflation outcomes are expected to converge after short run fluctuations die out. Accordingly, the inflation target needs to be fixed in alignment with trend inflation to avoid unhinging inflation expectations and flattening the aggregate supply curve

Press Release RBI Working Paper Series No. 14 Asset Quality and Credit Channel of Monetary Policy Transmission in India: Some Evidence from Bank-level Data Janak Raj, Deba Prasad Rath, Pratik Mitra and Joice John@ Abstract 1This paper evaluates the impact of asset quality of scheduled commercial banks in India on the credit channel of monetary policy. The study finds that a robust credit channel of monetary transmission exists in India. Its efficacy, however, is impa

Press Release RBI Working Paper Series No. 13 Price Discrimination in Over-the-Counter Currency Derivatives ΨAbhishek Kumar and Vidya Kamate Abstract *This paper provides empirical evidence on the presence of considerable price discrimination in the Indian over-the-counter (OTC) currency derivatives market through an analysis of transaction level data. The average markup paid on USD/INR forward contracts declines with an increase in the level of sophistication of clie

Press Release RBI Working Paper Series No. 12 Bank Capital and Monetary Policy Transmission in India Silu Muduli and Harendra Behera@ Abstract *This paper examines the role of bank capital in monetary policy transmission in India during the post-global financial crisis period. Empirical results show that banks with higher capital to risk-weighted assets ratio (CRAR) raise funds at a lower cost. Additionally, banks with higher CRAR transmit monetary policy impulses smo

Press Release RBI Working Paper Series No. 11 Inflation Forecast Combinations – The Indian Experience Joice John*, Sanjay Singh and Muneesh Kapur@ Abstract 1 Accurate, reliable and unbiased forecasts of inflation are critical for the monetary policy decision making process, more so for a flexible inflation targeting central bank. Inflation forecasting is, however, turning challenging across countries. This paper explores the merits of forecast combination approaches f

Press Release RBI Working Paper Series No. 10 Are Food Prices Really Flexible? Evidence from IndiaGV Nadhanael* Abstract@This paper revisits the notion of flexibility of food prices by compiling a novel micro level dataset for India. It shows that food prices in India exhibit varying degrees of price stickiness across product groups. Furthermore, the price setting behaviour broadly matches predictions of sticky price models with menu cost. Model calibration shows that

Press Release RBI Working Paper Series No. 09 Measuring Financial Stress in India @Manjusha Senapati Rajesh Kavediya Abstract 1This paper focuses on the construction of financial stress indices for the Indian financial system using market-based indicators and three different aggregation methods. The paper finds that these indices provide useful information, which is not captured by the market indicators, on the stress build-up in the financial system. The financial st

Press Release RBI Working Paper Series No. 08 Subnational Government DebtSustainability in India:An Empirical Analysis @Sangita Misra Kirti Gupta Pushpa Trivedi Abstract *Recognising the increasing precedence of fiscal shocks leading to a deterioration in states’ debt due to the realisation of contingent liabilities, this study assesses the debt sustainability of Indian states by employing both conventional debt and augmented debt, obtained by incorporating informatio

Press Release RBI Working Paper Series No. 07 Impact of Leverage on Firms’ Investment: Decoding the Indian Experience @Avdhesh Kumar Shukla and Tara Shankar Shaw Abstract 1It has been observed in India that economic growth cycle coincides with the investment cycle. We find that firm-level leverage could provide early signals about the movements in the investment cycle. Furthermore, a firm’s leverage adversely affects its investment activity after a threshold. Regressi

Press Release RBI Working Paper Series No. 06 Liquidity Shocks and Overnight Interest Rates in Emerging Markets: Evidence from GARCH Models for India @Bhupal Singh Abstract *This paper examines the role of key frictional and structural liquidity shocks in shaping the movement in call money rates and the pattern of volatility. Using Generalized Autoregressive Conditional Heteroscedasticity models, this study finds that both structural and frictional liquidity shocks ar

Press Release RBI Working Paper Series No. 05 Core Inflation Measures in India – An Empirical Evaluation using CPI Data @Janak Raj, Sangita Misra, Asish Thomas George and Joice John Abstract *An appropriate measure of core inflation provides a useful guide for monetary policy. This study analysed eleven candidates of core inflation measure in India, based on Consumer Price Index for the period from January 2012 to September 2019 for assessing their suitability as meas

Press Release RBI Working Paper Series No. 04 Macroeconomic Effects of Uncertainty: A Big Data Analysis for India @Nalin Priyaranjan and Bhanu Pratap Abstract * Uncertainty about the current state and near-term outlook of an economy as well as the likely course of future policy actions can prompt economic agents to alter their decisions to spend, save, invest and hire. In this paper, we construct three alternative indices to measure the level of uncertainty for the In