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Implications Of Bank Ownership For The Credit Channel Of Monetary Policy Transmission: Evidence From India

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Executive Summary

Many developing and emerging markets have high degrees of state bank ownership. In addition, the recent global financial crisis has led to significant state ownership of banking assets in developed countries such as the United Kingdom. These observations beg the question of whether the effectiveness of monetary policy through a lending channel differs across banks with different ownerships. In this paper, using bank-level data from India, the authors examine this issue and also test whether the reaction of different types of banks (i.e., private, state and foreign) to monetary policy changes is different in easy and tight policy regimes.

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