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Impact of RBI’s monetary policy announcements on government bond yields: evidence from the pandemic

We investigate how the bond market responded to the Reserve Bank of India’s (RBI) monetary policy actions undertaken since the start of the pandemic. Our approach involves combining a narrative analysis of the media coverage together with an event-study framework around RBI’s monetary policy announc...

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Detalles Bibliográficos
Autores principales: Lakdawala, Aeimit, Pratap, Bhanu, Sengupta, Rajeswari
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer India 2023
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10199284/
https://www.ncbi.nlm.nih.gov/pubmed/37360996
http://dx.doi.org/10.1007/s41775-023-00171-2
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author Lakdawala, Aeimit
Pratap, Bhanu
Sengupta, Rajeswari
author_facet Lakdawala, Aeimit
Pratap, Bhanu
Sengupta, Rajeswari
author_sort Lakdawala, Aeimit
collection PubMed
description We investigate how the bond market responded to the Reserve Bank of India’s (RBI) monetary policy actions undertaken since the start of the pandemic. Our approach involves combining a narrative analysis of the media coverage together with an event-study framework around RBI’s monetary policy announcements. We find that the RBI’s actions early in the pandemic were helpful in providing an expansionary impulse to the bond market. Specifically, long-term bond interest rates would have been meaningfully higher in the early months of the pandemic if not for the actions undertaken by the RBI. These actions involved unconventional policies providing liquidity support and asset purchases. We find that some of the unconventional monetary policy actions had a substantial signaling channel component where the market perceived the announcement of an unconventional monetary policy action as representing a lower future path for the short-term policy rate. We also find that the RBI’s forward guidance was more effective in the pandemic than it had been in the couple of years preceding the pandemic.
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spelling pubmed-101992842023-05-23 Impact of RBI’s monetary policy announcements on government bond yields: evidence from the pandemic Lakdawala, Aeimit Pratap, Bhanu Sengupta, Rajeswari Indian Econ Rev Article We investigate how the bond market responded to the Reserve Bank of India’s (RBI) monetary policy actions undertaken since the start of the pandemic. Our approach involves combining a narrative analysis of the media coverage together with an event-study framework around RBI’s monetary policy announcements. We find that the RBI’s actions early in the pandemic were helpful in providing an expansionary impulse to the bond market. Specifically, long-term bond interest rates would have been meaningfully higher in the early months of the pandemic if not for the actions undertaken by the RBI. These actions involved unconventional policies providing liquidity support and asset purchases. We find that some of the unconventional monetary policy actions had a substantial signaling channel component where the market perceived the announcement of an unconventional monetary policy action as representing a lower future path for the short-term policy rate. We also find that the RBI’s forward guidance was more effective in the pandemic than it had been in the couple of years preceding the pandemic. Springer India 2023-05-20 /pmc/articles/PMC10199284/ /pubmed/37360996 http://dx.doi.org/10.1007/s41775-023-00171-2 Text en © The Author(s) under exclusive licence to Editorial Office, Indian Economic Review 2023, Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law. This article is made available via the PMC Open Access Subset for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic.
spellingShingle Article
Lakdawala, Aeimit
Pratap, Bhanu
Sengupta, Rajeswari
Impact of RBI’s monetary policy announcements on government bond yields: evidence from the pandemic
title Impact of RBI’s monetary policy announcements on government bond yields: evidence from the pandemic
title_full Impact of RBI’s monetary policy announcements on government bond yields: evidence from the pandemic
title_fullStr Impact of RBI’s monetary policy announcements on government bond yields: evidence from the pandemic
title_full_unstemmed Impact of RBI’s monetary policy announcements on government bond yields: evidence from the pandemic
title_short Impact of RBI’s monetary policy announcements on government bond yields: evidence from the pandemic
title_sort impact of rbi’s monetary policy announcements on government bond yields: evidence from the pandemic
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10199284/
https://www.ncbi.nlm.nih.gov/pubmed/37360996
http://dx.doi.org/10.1007/s41775-023-00171-2
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