Indira Gandhi Institute of Development Research

About: Indira Gandhi Institute of Development Research is a facility organization based out in Mumbai, Maharashtra, India. It is known for research contribution in the topics: Monetary policy & Inflation. The organization has 307 authors who have published 1021 publications receiving 18848 citations.

The Tale of One Market Inefficiency: Abnormal Returns Around GDR Issues by Indian Firms

Abstract: This article relates the experience of abnormal returns on the Bombay Stock Exchange surrounding the pricing date of GDR issues by Indian firms On 15 May 1994, empirical evidence suggesting that such abnormal returns do exist was released into the information set of agents in the financial industry Today, as many GDR issues have taken place after 15 May 1994 as had taken place before, and we can measure how this mispricing has changed We find that the extent of mispricing has dropped sharply: the highest point in the average cumulative returns in excess of the market index over the weeks preceding the pricing date have dropped from 189% for the 20 GDR issues before 15 May 1994 to 69% for the 26 GDR issues after this date This reduction in the extent of mispricing is consistent with our understanding of arbitrage by rational agents in financial markets

Network compatibility, intensity of competition and process R&D: A Generalization

Abstract: This paper analyses implications of network compatibility and competition on process innovation in differentiated network goods duopoly. It shows that firms RD but, when Bertrand firms also undertake process innovation, Cournot-Bertrand R&D ranking depends on the strength of network externalities.

By Way of Conclusion: Selected Issues in Designing a New Architecture for the Indian Financial Sector

Abstract: As the threat of the global crisis receded in India, issues of financial architecture have become dominant, with the inception of the FSDC and the announcement of the FSLRC. We make out a case for a highly calibrated approach to the far-sweeping agenda marked out by the HPEC and CFSR (and largely but also more cautiously) endorsed by the FSLRC, especially as regards three issues: (i) the shift towards a principles-based system of R&S, (ii) instituting an integrated financial supervisory system and (iii) divesting the RBI of its banking supervision and public debt management responsibilities. The future success of financial reforms in India will be crucially contingent upon how successfully the regulatory architecture adapts to the competing dictates of financial development and financial stability, and the extent to which the regulatory and supervisory system succeeds in maintaining its independence from the government as well as market participants.

Relationship Banking and the Credit Market in India An Empirical Analysis

Abstract: Relationship banking based on Okun’s ‘customer credit markets’ has important implications for monetary policy via the credit transmission channel. Studies of less-developed country (LDC) credit markets from this point of view seem to be scanty and this article attempts to address this lacuna. Relationship banking implies short-term dis-equilibrium in credit markets, suggesting the vector error-correction model (VECM) as an appropriate framework for analysis. We develop VECM models in the Indian context (for the period April 1992–December 2008 using monthly data) to analyse salient features of the credit market. An analysis of the error-correction mechanisms (ECMs ) reveals that disequilibrium in the Indian credit market is adjusted via demand responses rather than supply responses, which are in accordance with the customer view of credit markets. Further light on the working of the model is obtained through ‘generalised’ impulse responses and ‘generalised’ error decompositions (both of which are independe...

Currency Market Interlinkages and Contagion

Abstract: The South East Asian crisis has started a debate on contagion. This paper aims at throwing some light on the same issue. We analyze the short-run and long-run dynamics between currency markets of six South East Asian economies using the Vector Auto Regression technique. The currency markets of South East Asia show a high level of correlation over the entire sample period from 7th November, 1997 to 20th February, 2000. Therefore, when one currency devalues, another currency also devalues as dictated by the correlation between the markets. But such a reaction by one market to another cannot be termed as contagion. We examine whether the correlations between different markets increase during "crisis" episodes, where a crisis is defined to be a sharp devaluation that exceeds the mean devaluation of the country over the entire period by one standard deviation. By assigning dummies to episodes of simultaneous devaluations between different countries, it is shown that currency market interlinkages become stronger during crisis episodes. This increase in the currency market interlinkages is then modeled as contagion. A simple VAR cannot be used for exchange rate modeling, because daily exchange rates are seen to follow GARCH processes. The errors for all the equations in the model are GARCH distributed and have time-varying variances. Therefore, it is essential to solve the VAR model together with the variance equations. The paper assumes the constancy of the correlation coefficients even if the variances and covariances are time-varying. With this assumption, the paper essentially solves the VAR equation by equation, together with the variance equations for errors.