Hutchison, Michael and Sengupta, Rajeswari and Singh, Nirvikar (2010): Estimating a monetary policy rule for India. Published in: Economic and Political Weekly , Vol. Vol xl, (18. September 2010): pp. 67-69.
Download (124Kb) | Preview
This paper investigates whether the seemingly discretionary and flexible approach of the Reserve Bank of India can in practice be described by a Taylor-type rule. It estimates an exchange-rate-augmented Taylor rule for India over the period Quarter 1 of 1980 to Quarter 4 of 2008. It investigates monetary policy changes between the pre- and post-liberalization periods in order to capture the potential impact of macroeconomic structural changes on the RBI's monetary policy conduct. Overall, it finds that the output gap seems to matter more to RBI than inflation, there is greater sensitivity to consumer price inflation, exchange rate changes do not constitute an important policy factor, and the post-1998 conduct of monetary policy seems to have changed in the direction of less inertia.
|Item Type:||MPRA Paper|
|Original Title:||Estimating a monetary policy rule for India|
|Keywords:||Reserve Bank of India; Monetary Policy; Taylor Rule; Indian Economy|
|Subjects:||E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
|Depositing User:||Rajeswari Sengupta|
|Date Deposited:||21. May 2012 17:17|
|Last Modified:||12. Feb 2013 10:35|
Clarida, R., Gali, J. and M. Gertler, 2000, Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory, Quarterly Journal of Economics 115, 147-180.
Mohan, R., 2006, Monetary policy and exchange rate frameworks-the Indian experience, Presentation at the Second High Level Seminar on Asian Financial Integration organized by the International Monetary Fund and Monetary Authority of Singapore, Singapore.
Mohanty, M.S., and M. Klau, 2005, Monetary Policy Rules in Emerging Market Economies: Issues and Evidence, in Rolf J. Langhammer and Lucio Vinhas de Souza, eds., Monetary Policy and Macroeconomic Stabilization in Latin America, (Berlin) 205-245.
Taylor, J. B., 1993, Discretion versus Policy Rules in Practice, Carnegie-Rochester Conference Series on Public Policy 39, 195-214.
Taylor, J. B., 2001, The Role of the Exchange Rate in Monetary Policy Rules, American Economic Review Papers and Proceedings 91, 263-67.
Virmani, V., 2004, Operationalizing Taylor-type rules for the Indian economy, Technical report, Indian Institute of Management, Ahmedabad, Gujarat, India.
Woodford, M., 2001, The Taylor Rule and Optimal Monetary Policy, American Economic Review 91(2), 232-237.