Journal of Business Thought

Kajleen Kaur ¹, Yogieta S. Mehra ², Jasmit Kaur ³

Affiliations
1 Assistant Professor, Department of Economics, Sri Guru Gobind Singh College of Commerce, University of Delhi, IN
2 Assistant Professor, Department of Management Studies, Deen Dayal Upadhyaya College, University of Delhi, IN
3 Assistant Professor, Department of Commerce, Sri Guru Gobind Singh College of Commerce, University of Delhi, IN

Abstract

The role of the monetary policy in any country is to achieve higher rate of growth with a stable inflation rate. These objectives become all the more important in an emerging economy such as India. Since 2009 the monetary authority has been giving higher preference to price control and so has increased the repo rate, or not reduced it, even after constant pressure from the government. Under the recommendation of the Chakraborty Committee since 1998-99, India has been following a multiple targeting approach where the only target or objective is not either price control or higher growth but multiple. However post US crisis, since 2010 it has been trying to target or control inflation. Every increase in the repo rate has been justified by the Governor of Reserve Bank of India as necessary to control uncontrollable inflation rate. But ideally, according to many theories and studies chasing inflation is not suitable for our country. In the light of all this, the present paper studies some important factors affecting inflation which can help us analyze the monetary policy response to inflation. The paper uses annual time series data to study the effectiveness of monetary policy in controlling inflation. Granger causality is also tested across inflation and the factors affecting it, in order to study influential factors and future policy actions. The results drawn are mixed in the multivariate linear regression model.

Keywords

Monetary Policy, Inflation, Interest Rate

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Kajleen Kaur ¹

Affiliations
1 Assistant Professor, Sri Guru Gobind Singh College of Commerce, University of Delhi, Delhi, IN

Abstract

The monetary policy of any country strives to achieve a balance between its goals of price stability and higher growth by using various monetary policy tools. In light of this, the aim of the study is to examine the monetary policy of the Reserve Bank of India for achieving these objectives using interest rate as a tool, in terms of Taylor equation for the period 1996Q1 to 2013Q3. The Autoregressive Distributed Lag bounds testing approach to cointegration is used for studying the monetary policy behavior. The paper also broadens the Taylor equation to incorporate the fiscal and open economy parameters as factors affecting monetary policy behaviour. The result suggests that the growth criterion is the most significant factor affecting the interest rate policy of the bank. It also finds inflation control and open economy volatility as important factors in the policy decision making but with lesser weightage. The fiscal parameter turns out to be insignificant. The findings suggest that the monetary policy decision making is growth enhancing.

Keywords

Monetary Policy, Inflation, Interest Rate

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Kajleen Kaur ¹

Affiliations
1 Department of Economics, Sri Guru Gobind Singh College of Commerce, University of Delhi, New Delhi-110034, IN

Abstract

Monetary Policy consists of issues related to deciding the right quantity of money to be supplied to the economy for achieving its policy goals and also deciding on the right framework for pursuing the same. The process involves choosing monetary policy targets, understanding the various channels of monetary policy transmission and making use of the best set of tools which has the maximum potential to affect the target variables. The study helps us to build a deep insight into the contemporary monetary policy issues for the Indian economy.

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Kajleen Kaur ¹, Aanchal Khanna ¹, Bavleen Kaur ¹, Disha Kapahi ¹, Khushboo Madaan ¹

Affiliations
1 Department of Economics, Sri Guru Gobind Singh College of Commerce, University of Delhi, New Delhi - 110034, IN

Abstract

This paper analyses the Annual Surveys on International Trade in Banking Services of the Reserve Bank of India for the period 2013-19. It compares performance across three different categories of banks namely, Indian Banks’ Branches Operating Abroad, Indian Banks’ Subsidiaries Operating Abroad and Foreign Banks’ Branches Operating in India. Using trend and percentage analysis, the paper portrays various parameters graphically. The analysis demonstrates that the Foreign Banks in India perform better than the Indian banks abroad. The paper suggests compliance with BASEL-III norms and prudential regulations along with better technological compliance for more competitive performance by the Indian counterparts in future.

Keywords

Central Bank, International Trade and Finance, Interest Rates, Mergers and Acquisitions

JEL classification: G33, E58, G34

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