Central bank's liquidity provision and firms' financial constraints

摘要

This paper investigates the impact of central bank's liquidity operations on the financial constraints of the bank-dependent firms. We use the Reserve Bank of India's liquidity operation called Term Repo Operation (TRO) in the study. The empirical analysis is based on a large scale firm-level data for the period 2011-2016 and panel logit estimation method. Our findings indicate that the financial constraints of the bank-dependent firms have reduced than their counterparts since the introduction of the operation. We also show that larger firms reap significant benefit out of TRO than the smaller firms.