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

Press ReleaseRBI Working Paper Series No. 03 Nowcasting Indian GDP growth using a Dynamic Factor Model @Soumya Bhadury Saurabh Ghosh Pankaj Kumar Abstract 1In India, the first official estimate of quarterly GDP is released approximately 7-8 weeks after the end of the reference quarter. To provide an early estimate of current quarter GDP growth, we construct single-index dynamic factors (DFs) using a sequentially expanding list of 6, 9 and 12 high-frequency indicators.