Informal Credit Markets and Monetary Policy

Informal Credit Markets and Monetary Policy Shankar Acharya Srinivasa Madhur INTRODUCTION IN our paper 'Informal Credit Markets and Black Money: Do They Frustrate Monetary Policy' (see Acharya and Madhur, 1983), we had tried to tackle the issue of whether the existence of an informal credit market and 'black liquidity' undermines the operation of official monetary and credit policy at the aggregate level. To address this issue, we formulated a simple model of the markets for commercial bank credit and informal credit and the interactions between them.