The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
This paper provides new evidence on the credit channel of monetary policy transmission
in India. Using stepwise estimation of vector error correction models, the analysis finds
significant, albeit slow, pass-through of policy rate changes to bank interest rates in India.
There is evidence of asymmetric adjustment to monetary policy: the lending rate adjusts
more quickly to monetary tightening than to loosening. In addition, the speed of
adjustment of deposit and lending rates to changes in the policy rate has increased in