Monetary Policy and Liquidity in India. Evaluating the Economic Impact of Key Instruments (2004-2024)
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Research Paper (undergraduate) from the year 2024 in the subject Business economics - Economic Policy, grade: A, , course: B.Com. International Accounting and Finance, language: English, abstract: This study investigates the pivotal role of monetary policy in managing liquidity and its broader implications for India's economic performance between 2004-2005 and 2023-2024. The primary objective is to empirically assess how key monetary instruments-namely the Bank Rate, Repo Rate, Reverse Repo Rate, Cash Reserve Ratio (CRR), and Statutory Liquidity Ratio (SLR)-affect the money supply, specificall...
Research Paper (undergraduate) from the year 2024 in the subject Business economics - Economic Policy, grade: A, , course: B.Com. International Accounting and Finance, language: English, abstract: This study investigates the pivotal role of monetary policy in managing liquidity and its broader implications for India's economic performance between 2004-2005 and 2023-2024. The primary objective is to empirically assess how key monetary instruments-namely the Bank Rate, Repo Rate, Reverse Repo Rate, Cash Reserve Ratio (CRR), and Statutory Liquidity Ratio (SLR)-affect the money supply, specifically M3 (Broad Money). Utilizing a quantitative research design, the study applies bivariate correlation and Ordinary Least Squares (OLS) regression to evaluate the strength and direction of these relationships. Findings indicate that higher repo rates are associated with slower growth in money supply, while reductions in CRR and SLR foster liquidity expansion. Moreover, a strong positive correlation between policy tools and money supply underlines the significant influence of monetary adjustments on India's financial environment. The OLS results show a negative impact of the bank rate and positive effects from the repo rate and SLR on broad money. These insights underscore the necessity of a balanced and responsive monetary policy framework to enhance credit availability, support financial stability, and promote sustained economic growth in emerging economies like India.
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