Press Release RBI Working Paper Series No. 03 Benchmarking Indian Regulatory Practices to the G20 Financial Reforms Agenda @Anupam Prakash and Rajiv Ranjan 1Post the crisis of 2007-09, financial stability is regarded as a prime policy objective. The reemergence of threats to the banking system in the light of sovereign debt problems in advanced economies has reaffirmed the importance of pursuing financial sector reforms at the international level. The global regulato

Press Release RBI Working Paper Series No. 02 Gold Prices and Financial Stability in India@Rabi N. Mishra and G. Jagan Mohan Abstract * There has been an almost sustained rise in the international gold prices since 2002, with just one deep correction in 2008. As gold is an integral part of savings of a large number of investors, this has raised apprehensions whether any correction in gold prices will have destabilising implications on the financial markets. In this ba

Press Release RBI Working Paper Series No. 01 Inflation Forecasting: Issues and Challenges in India@Muneesh Kapur 1This paper focuses on modelling and forecasting inflation in India using an augmented Phillips curve framework. Both demand and supply factors are seen as drivers of inflation. Demand conditions are found to have a stronger impact on non-food manufactured products inflation (NFMP) vis-a-vis headline WPI inflation; moreover, NFMP is found to be more persis

Press Release RBI Working Paper Series No. 21 Inter-connectedness of Banks and NBFCs in India: Issues and Policy Implications @ A Karunagaran Abstract * The recent global financial crisis (2007-09) has clearly highlighted the gravity of high financial inter-connectedness within the financial system. In the Indian context, this brief study attempts to explore the financial inter-connectedness between NBFCs (both deposit taking and non-deposit taking) with banking syst

Press ReleaseRBI Working Paper Series No. 22 Credit and Growth Cycles in India: An Empirical Assessment of the Lead and Lag Behaviour @ Krittika Banerjee Abstract* Procyclicality in the flow of credit has been a factor underpinning the magnified amplitudes of boom and bust phases of the business cycle, particularly in bank dominated financial systems. This paper studies the lead-lag pattern in the interaction between credit and growth cycles of India at three levels i

Press Release RBI Working Paper Series No. 20Credit Channel of Monetary Transmission in India - How Effective and Long is the Lag?@Jeevan Kumar Khundrakpam Abstract *This paper examined the operation of credit channel of monetary policy rate transmission in India during the post-LAF period of 2001:3 to 2011:3. Drawing on the literature, two reduced form equations, one representing nominal bank credit and the other real bank credit was estimated. The regression estimat

Press Release RBI Working Paper Series No. 19 QE-II and FII inflows into India – Is there a Connection? @Anand Shankar Abstract 1Faced with near zero interest rates, monetary easing in the form of quantitative easing (QE) undertaken after the global financial crisis in many developed countries have added to global liquidity and are said to be fuelling massive capital flows into the Emerging Market Economies. In this context, this paper traces a brief history of QE and

Press Release RBI Working Paper Series No. 15An Empirical Analysis of Monetary and Fiscal Policy Interaction in India@Janak Raj, J. K. Khundrakpam & Dipika Das Abstract •This study analyses the behaviour of monetary and fiscal policies interaction in India using quarterly data for 2000Q2 to 2010Q1. It finds that, even after the elimination of automatic monetisation of fiscal deficit in 1997 and prohibiting RBI from buying government securities in the primary marke

Press Release RBI Working Paper Series No. 13 Long Run and Short Run Saving- Investment Relationship in India @Bichitrananda Seth Abstract 1The present study examines short and long run relationship between gross domestic savings and investment as well as corporate sector savings and corporate sector investment in India using Engel Granger cointegration test. Also attempt is made to find out the rate of adjustment in the disequilibrium being corrected in the short ru

Press Release RBI Working Paper Series No. 14 Recent Global Crisis and the Demand for Gold by Central Banks: An Analytical Perspective @A Karunagaran Abstract 1When India purchased 200 tonnes of gold under the International Monetary Fund's limited gold sales programme, it was interpreted inter alia that it may further inflate the gold price when the price was already ruling high. This motivated us to examine the general trend among the central banks’ demand for gold

Press Release RBI Working Paper Series No. 18 Inflation Threshold in India: An Empirical Investigation @Deepak Mohanty, A B Chakraborty, Abhiman Das and Joice John Abstract 1This paper examines the issue of the existence of threshold effects in the relationship between inflation rate and real GDP growth in India using 3 different approaches. In view of the structural changes of the economy, the empirical analysis uses data for the period of Q1:1996-97 to Q3:2010-11

Press Release RBI Working Paper Series No. 17Why Persistent High Inflation Impedes Growth? An Empirical Assessment of Threshold Level of Inflation for India @Sitikantha Pattanaik G V Nadhanael Abstract *In the policy debate on growth-inflation tradeoff and the role of monetary policy in managing the tradeoff in the short-run, theoretical and empirical research suggests the presence of a country specific threshold level of inflation. Monetary policy may accommodate inf

Press Release RBI Working Paper Series No. 16 Measures of Core Inflation in India – An Empirical Evaluation @Janak Raj & Sangita Misra Abstract *This study attempts to analyse six exclusion-based measures of core inflation in India based on new series of WPI (2004-05=100). These are: WPI excluding food; WPI excluding fuel; WPI excluding food and fuel; non-food manufacturing; WPI excluding fuel and basic metals and metal products; and WPI excluding fuel, metal gro

Press Release RBI Working Paper Series No. 11 Effects of Recent Financial Crisis on Optimal Asset Allocation of Foreign Exchange Reserves@A. K. Srimany, Sneharthi Gayen and Ranjeev *Post financial crisis, yield in the developed sovereign markets is prevailing at very low level and consequently return generated by deployment of foreign exchange reserves have been very low together with increased risk of getting negative return more frequently.In this paper, we discuss

Press Release RBI Working Paper Series No. 12Monetary Policy and Food Prices in India@Jeevan Kumar Khundrakpam and Dipika Das Abstract*Using a vector error correction model (VECM), the paper examines the relative response of food and manufactured prices to change in interest rate and money supply in India during the period 2001:Q1 to 2010:Q2. It finds that, in the long-run, while money supply leads to rise in the prices of both food and manufactured prices, hike in c

RBI Working Paper Series No. 10 Determinants of Primary Yield Spreads of States in India: An Econometric Analysis@Dhritidyuti Bose, Rajeev Jain and L. Lakshmanan *The year 2006-07 was marked by a switch over to the auction based issuances of the State Development Loans. Presently, India’s sub-national debt market can at best be regarded at a nascent stage of development compared to other advanced economies. With an increasing emphasis on fiscal decentralisation, it is

RBI Working Paper Series No. 09Treatment of Valuables as Capital Formation in India: Some Issues and Perspectives @Rakesh Kumar Abstract † As per UNSNA recommendations, valuables as a separate item had been introduced in the expenditure side of GDP. Since India is one of largest importer and user of gold for various purposes, this treatment resulted into higher share of valuables in capital formation in the economy. Moreover, from conceptual aspect, these valuables a

RBI Working Paper Series No. 06 The Velocity Crowding-out Impact: Why high money growth is not always inflationary @Sitikantha PattanaikSubhadhra S Abstract: In the mainstream monetary policy consensus that prevailed prior to the global crisis, there was increasing de-emphasis on money and credit aggregates in the conduct of monetary policy, because of the overwhelming faith on the interest rate, both as an instrument of policy and as an indicator of overall monetary

RBI Working Paper Series No. 07 Sensitivity of Capital Flows to Interest Rate Differentials: An Empirical Assessment for India @Radheshyam Verma and Anand Prakash *In the aftermath of the global financial crisis, multi-speed recovery and divergent inflationary trends have led to asymmetric monetary exit between Emerging Market Economies (EMEs) and the advanced economies. An outcome of this process has been return of excessive capital flows to EMEs, exerting pressure o