Khundrakpam, Jeevan Kumar (2013): A Note on Differential Asymmetric Effects of Money Supply and Policy Rate Shocks in India.
Preview |
PDF
MPRA_paper_53058.pdf Download (176kB) | Preview |
Abstract
The paper attempts to analyse the asymmetric effects of money supply and policy rate shocks in India using quarterly data from 1996-97Q1 to 2011-12Q4. It finds that both the shocks impact real output growth and inflation in the short-run, but have a differential impact among components of aggregate demand. An unanticipated hike/cut in policy rate has a symmetric impact of reducing/increasing GDP growth arising due to a corresponding symmetric impact on investment growth only. In contrast, an unanticipated increase/decrease in money supply has an asymmetric impact– only an unanticipated increase in money supply increases private consumption growth and GDP growth, while there is no impact on the other components aggregate demand. An unanticipated hike/reduction in policy rate leads to a symmetric decline/rise in inflation. An unanticipated change in money supply leads to higher inflation, but a similar decrease in it has no significant impact on inflation.
Item Type: | MPRA Paper |
---|---|
Original Title: | A Note on Differential Asymmetric Effects of Money Supply and Policy Rate Shocks in India |
English Title: | A Note on Differential Asymmetric Effects of Money Supply and Policy Rate Shocks in India |
Language: | English |
Keywords: | Monetary Policy, Asymmetry, Inflation, Policy Rate |
Subjects: | C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers |
Item ID: | 53058 |
Depositing User: | Jeevan Kumar Khundrakpam |
Date Deposited: | 21 Jan 2014 05:07 |
Last Modified: | 26 Sep 2019 11:47 |
References: | Aleem, Abdul (2010), “Transmission Mechanism of Monetary Policy in India”, Journal of Asian Economics, 21, 186-197. Al-Mashat, R. (2003), “Monetary Policy Transmission in India: Selected Issues and Statistical Appendix, Country Report, No. 03/261, International Monetary Fund. Aye Goodness C. And Rangan Gupta (2012), “Are the Effects of Monetary Policy Asymmetric in India? Evidence from a Nonlinear Vector Autoregression Approach”, Working Paper 2012-02, Department of Economics, University of Pretoria, January. Ball, L. and N.G. Mankiw (1994), “Asymmetric Price Adjustment and Economic Fluctuations”, Economic Journal, 104, pp. 247-261. Bernanke, B.S. and M. Gertler (1989), “Agency Costs, Net Worth, and Business Cycle Fluctuations”, American Economic Review, 82, pp. 901-921. Bhaumik, S. K., Vinh Dang and Ali M. Kutan (2010), “Implications of bank ownership for the credit channel of monetary policy transmission: evidence from India”, William Davidson Institute Working Paper Number 988, University of Michigan. Bodman Philip M. (2006), “Are the Effects of Monetary Policy Asymmetric in Australia?,” School of Economics, The University of Queensland, Discussion Paper No. 4. Boschen, J. F. and H. I. Grossman (1981), “Tests of Equilibrium Macroeconomics with Contemporaneous Monetary Data”, Working Paper No. 558R, National Bureau of Economic Research. Cover James Perry (1992), “Asymmetric Effects of Positive and Negative Money-Supply Shocks”, Quarterly Journal of Economics, Volume 107, No.4, pp.1261-1282. Florio, Anna (2005), "Asymmetric Monetary Policy: Empirical Evidence for Italy," Applied Economics, Taylor and Francis Journals, Vol. 37(7), pages 751-764. Gertler, M. (1988), “Financial Structure and Aggregate Economic Activity: An Overview”, NBER Working Paper No. 2559, National Bureau of Economic Research, Cambridge, MA. Kapur Muneesh and Harendra Behera (2012), “Monetary Transmission Mechanism in India: A Quarterly Model”, RBI Working Paper No. WPS (DEPR): 9/ 2012. Karras, G. (1996a), “Are the Output Effects of Monetary Policy Asymmetric? Evidence from a Sample of European Countries”, Oxford Bulletin of Economics and Statistics, 58, pp. 267-278. Karras, G. (1996b), “Why are the Effects of Monetary-Supply Shocks Asymmetric? Convex Aggregate Supply or “Pushing on a String? ”, Journal of Macroeconomics, 18, pp. 605-619. Khundrakpam Jeevan Kumar (2012), “Estimating the Impacts of Monetary Policy on Aggregate Demand in India”, RBI Working Paper Series, WPS, DEPR 18/2012, December. Khundrakpam Jeevan Kumar (2013), “Credit Channel of Monetary Policy Transmission in India - How Effective and Long is the Lag?”, The IUP Journal of Applied Economics, Vol. XII, No.1, pp. 26-49 . Khundrakpam Jeevan Kumar and Rajeev Jain (2012), “Monetary Policy Transmission in India: A Peep Inside the Black Box ”, RBI Working Paper No. WPS (DEPR): 11/ 2012. MacDonald Garry, Andy Mullineux and Rudra Sensarma (2011), “Asymmetric Effects of Interest Changes: The Role of the Consumption-Wealth Channel,” Applied Economics, Vol. 43, No.16. Mishkin, F. (1982), “Does Anticipated Monetary Policy Matter? An Econometric Investigation,” Journal of Political Economy, 10(1). Mohanty, D. (2012), “Evidence on Interest Rate Channel of Monetary Policy Transmission in India”, Paper Presented at the Second International Research Conference at the Reserve Bank of India, February 1-2. Morgan, D.P. (1993), “Asymmetric Effects of Monetary Policy,” Federal Reserve Bank of Kansas City Economic Review, Vol 2., pp.21-33. Pandit, B.L., Ajit Mittal, Mohua Roy and Saibal Ghosh (2006), “Transmission of Monetary Policy and the Bank Lending Channel: Analysis and Evidence for India”, DRG Study No. 25, Department of Economic Analysis and Policy, Mumbai, Reserve Bank of India. Pandit, B. L and Pankaj Vashisht [2011], “Monetary Policy and Credit Demand in India and Some EMEs”, ICRIER Working Paper No.256. Patra, Debabrata Michael and Muneesh Kapur (2010), “A Monetary Policy Model Without Money for India”, IMF Working Paper No.10/183, International Monetary Fund. Reserve Bank of India (2005), Report on Currency and Finance, 2003-04. Rhee Wooheon (1995), “Asymmetric Effects of Money on Inflation: Evidence from Korean Data,” International Economic Journal, Vol. 9, No. 4. pp. 31-43. Rhee, W. And R.W. Rich (1995), “Inflation and the Asymmetric Effects of Money on Output Fluctuations”, Journal of Macroeconomics, 17, pp. 683-702. Thoma, M.A. (19994), “Subsample Instability and Asymmetries in Money-Income Causality”, Journal of Econometrics, 64, pp. 279-306. Shen, C.H. (2000), “ Are the Effects of Monetary Policy Asymmetric? The Case of Taiwan”, Journal of Policy Modeling, 22, pp. 197-218. Singh, Kanhaiya and Kaliappa Kalirajan [2007], “Monetary Transmission in Post-reform India: An Evaluation”, Journal of the Asia Pacific Economy, 12, 158–187. Tsiddon, D. (1993), “The Misbehaviour of the Aggregate Price Level”, Review of Economic Studies, 60, pp. 889-902. Weise Charles L. (1999), “The Asymmetric Effects of Monetary Policy: A Non-linear Vector Autoregression Approach”, Journal of Money, Credit and Banking, Vol. 31, No.1, pp.85-108. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/53058 |