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India’s financial sector has faced many challenges in recent decades, with a large, negative, and persistent credit to GDP gap since 2012. We examine how cyclical financial conditions affect GDP growth using a growth-at-risk (GaR) approach and analyze the link between bank balance sheets, credit growth, and long-term growth using bank-level panel regressions for both public and private banks. We find that on a cyclical basis, a negative shock to credit or a rise in macro vulnerability all shift the distribution of growth to the left, with lower expected growth and higher negative tail risks; over the long term, the results indicate that higher credit growth, arising from better capitalized banks with lower NPLs, is associated with higher GDP growth.

Macroeconomics --- Economics: General --- Money and Monetary Policy --- Banks and Banking --- Exports and Imports --- Accounting --- Industries: Financial Services --- Forecasting and Other Model Applications --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Business Fluctuations --- Cycles --- Financial Markets and the Macroeconomy --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- International Lending and Debt Problems --- Public Administration --- Public Sector Accounting and Audits --- Financial Institutions and Services: General --- Economic & financial crises & disasters --- Economics of specific sectors --- Monetary economics --- Banking --- International economics --- Financial reporting, financial statements --- Credit --- Money --- Bank credit --- State-owned banks --- Financial institutions --- Debt financing --- External debt --- Financial statements --- Public financial management (PFM) --- Currency crises --- Informal sector --- Economics --- Banks and banking --- Debts, External --- Finance, Public --- Financial services industry --- India

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While India’s growth has been strong in recent decades, its structural transformation remains incomplete. In this paper, we first take stock of India’s growth to date. We find that economic activity has shifted from agriculture to services, but agriculture remains the predominant employer. Catch up to the technological frontier has been uneven, with limited progress in agriculture, but also in construction and trade, which have grown the most in terms of employment. We do find some Indian firms already operating at the technological frontier. These strong performers tend to be large firms. We then consider India’s employment challenge going forward. We find that India needs to create between 143-324 million jobs by 2050 and that doing so and with workers shifting towards more dynamic sectors could boost GDP growth by 0.2-0.5 percentage points. Structural reforms can help India create high-quality jobs and accelerate growth.

Aggregate Human Capital --- Aggregate Labor Productivity --- Agribusiness --- Agricultural economics --- Agricultural industries --- Agricultural sector --- Agriculture: General --- Capacity --- Capital --- Choice of Technology --- Economic development --- Economic growth --- Economic sectors --- Economic theory --- Employment --- Human Capital --- Income economics --- Industrial Organization and Macroeconomics: Industrial Structure and Structural Change --- Industrial Price Indices --- Industrial productivity --- Industrialization --- Intangible Capital --- Intergenerational Income Distribution --- Investment --- Labor Productivity --- Labor productivity --- Labor --- Labour --- Macroeconomics --- Macroeconomics: Production --- Manufacturing and Service Industries --- Occupational Choice --- Production and Operations Management --- Production --- Productivity --- Skills --- Unemployment --- Wages

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This paper investigates the effects of unconventional monetary policy in a small open economy. Using recently proposed shadow interest rates to capture unconventional monetary policy at the zero lower bound (ZLB) we estimate a Bayesian structural vector autoregressive model for Canada - a useful case where foreign shocks can be proxied by U.S. variables alone. We find that, during the ZLB period, Canadian unconventional monetary policy increased output (measured by industrial production) by 0.013 percent per month on average while US unconventional monetary policy raised Canadian output by 0.127 percent per month on average. Our results demonstrate the effectiveness of domestic unconventional monetary policy and the strong positive spillover effects that foreign unconventional monetary policies can have in a small open economy.

Monetary policy --- Banks and Banking --- Money and Monetary Policy --- Industries: General --- Monetary Policy --- Central Banks and Their Policies --- International Policy Coordination and Transmission --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics: Production --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary economics --- Banking --- Finance --- Unconventional monetary policies --- Industrial production --- Zero lower bound --- Central bank policy rate --- Production --- Financial services --- Monetary expansion --- Interest rates --- Industries --- Banks and banking --- United States

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Banks guarantee international trade through letters of credit. This paper analyzes what happens to trade when the critical role of banks as trade guarantors is compromised. Using the case of the Greek capital controls in 2015, the events around which led to a massive loss of confidence in the domestic banking system, we show that firms whose operations were more dependent on domestic banks suffered a steep decline in imports and, subsequently, exports. This operated through letters of credit, which during the capital controls period had to be backed by firms’ own cash collateral rather than the bank guarantee. As a result, cash-poor firms imported relatively less. Public intervention to guarantee transactions is shown to help mitigate some of the decline in imports.

Macroeconomics --- Economics: General --- Exports and Imports --- Money and Monetary Policy --- Banks and Banking --- Empirical Studies of Trade --- Multinational Firms --- International Business --- International Lending and Debt Problems --- General Financial Markets: Government Policy and Regulation --- International Investment --- Long-term Capital Movements --- Trade: General --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Economic & financial crises & disasters --- Economics of specific sectors --- International economics --- Monetary economics --- Banking --- Capital controls --- Balance of payments --- Imports --- International trade --- Credit --- Money --- Commercial banks --- Financial institutions --- Capital outflows --- Currency crises --- Informal sector --- Economics --- Capital movements --- Banks and banking --- Greece

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Banks guarantee international trade through letters of credit. This paper analyzes what happens to trade when the critical role of banks as trade guarantors is compromised. Using the case of the Greek capital controls in 2015, the events around which led to a massive loss of confidence in the domestic banking system, we show that firms whose operations were more dependent on domestic banks suffered a steep decline in imports and, subsequently, exports. This operated through letters of credit, which during the capital controls period had to be backed by firms’ own cash collateral rather than the bank guarantee. As a result, cash-poor firms imported relatively less. Public intervention to guarantee transactions is shown to help mitigate some of the decline in imports.

Greece --- Macroeconomics --- Economics: General --- Exports and Imports --- Money and Monetary Policy --- Banks and Banking --- Empirical Studies of Trade --- Multinational Firms --- International Business --- International Lending and Debt Problems --- General Financial Markets: Government Policy and Regulation --- International Investment --- Long-term Capital Movements --- Trade: General --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Economic & financial crises & disasters --- Economics of specific sectors --- International economics --- Monetary economics --- Banking --- Capital controls --- Balance of payments --- Imports --- International trade --- Credit --- Money --- Commercial banks --- Financial institutions --- Capital outflows --- Currency crises --- Informal sector --- Economics --- Capital movements --- Banks and banking