Articles by Partha Ray

The new Basel accord is slated to come into effect in India around 2007 raising the question of how the revised standards will influence bank behaviour. Using a simple theoretical model, it is shown that the revised accord will result in asymmetric differences in the efficacy of monetary policy in influencing bank lending. This will, however, depend on a number of factors, including whether banks are constrained by the risk-based capital standards, the credit quality of bank assets and the relative liquidity of banks' balance sheets. The basic model is empirically explored using data on Indian commercial banks for the period 1996-2004. The analysis indicates that the effect of a contractionary monetary policy will be significantly mitigated provided the proportion of unconstrained to constrained banks in the system is significantly high.

The conduct of the Reserve Bank of India?s monetary policy in the 1990s has shaped and in turn, been shaped by the programme of financial sector reforms. The operating procedure of monetary policy had to be comprehensively recast to enable the shift from direct to indirect monetary policy instruments in consonance with the increasing market orientation of the economy. This paper examines the impact of financial sector reforms on the balance sheet of the RBI. In the wake of financial sector reforms, we find that a regime switching has taken place in the RBI?s asset size as well as in the size of its surplus. Moreover, the RBI Balance Sheet has become more transparent in line with international accounting standards.

In search of the micro-foundation of the commonly held view of a dominant Nasdaq and satellite Bombay Stock Exchange (BSE), the study looks into the price interdependence of 10 Indian companies, which have floated American Depository Receipts (ADRs). The strong correlation between the prices of the dually listed stocks is corroborated by the finding of a bidirectional causality in a vector auto regression model. The competing domestic stock exchange, viz, National Stock Exchange (NSE) too is found to share the same bidirectional relation scripwise with the Nasdaq/New York Stock Exchange. Furthermore, the impulse responses pattern indicates that a positive shock in the domestic (international) price of a scrip gets transmitted in terms of a strong positive movement in the international (domestic) price the very next day. Thus, the quotes of both the markets share not only a stockwise bidirectional causality, but markets also are efficient in processing and incorporating the pricing information.

The synchronised movement of BSE and Nasdaq has often been interpreted as an indication of integration catching up with the Indian financial markets. The authors have looked into the nature of relationship between the daily share price in BSE and NSE on the one hand and Nasdaq and New York Stock Exchange on the other, for 1999-2000 through 2000-2001 and have found a unidirectional causality from Nasdaq to BSE or NSE. The relationship as well as direction of causation also holds good for the technology segment of the New York Stock Exchange and BSE or NSE. However, domestic prices of technology stocks and overall domestic share prices were found to be independent of each other.