Industry Effects of Monetary Policy: Evidence from India

Ghosh, Saibal (2009): Industry Effects of Monetary Policy: Evidence from India. Published in: Indian Economic Review , Vol. 44, No. 1 (January 2009): pp. 89-105.

Abstract

The study exploits 2-digit level industry data for the period 1981-2004 to ascertain the interlinkage between a monetary policy shock and industry value added. Accordingly, we first estimate a Vector Auto Regression (VAR) model to ascertain the magnitude of a monetary policy shock on industrial output. Subsequently, we try to explain the observed heterogeneity in terms of industry characteristics. The findings indicate that (a) industries exhibit differential response to a monetary tightening and (b) both interest rate and financial accelerator variables tend to be important in explaining the differential response.

• Item Type: MPRA Paper
• Language: English
• Keywords: industry; monetary policy; interest rate channel; financial accelerator; vector auto regression; cross section regression
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General

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