A Monetary Business Cycle Model for India

Shesadri Banerjee (), Parantap Basu, Chetan Ghate, Pawan Gopalakrishnan and Sargam Gupta ()
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Shesadri Banerjee: Madras Institute of Development Studies
Sargam Gupta: Indian Statistical Institute, Delhi

Discussion Papers from Indian Statistical Institute, Delhi

Abstract: We build and calibrate a New Keynesian monetary business cycle model to the Indian economy to understand why the aggregate demand channel of monetary transmission is weak. Our main finding is that base money shocks have a larger and more persistent e§ect on output than an interest rate shock, as in the data. We show that financial repression, in the form of a statutory liquidity ratio and administered interest rates, does not weaken monetary transmission. This is contrary to the consensus view in policy discussions on Indian monetary policy. We show that the presence of an informal sector hinders monetary transmission

Keywords: Monetary Business Cycles; Monetary Transmission; Ináation Targeting (search for similar items in EconPapers)
JEL-codes: E31 E32 E44 E52 E63 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2018-01
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: A MONETARY BUSINESS CYCLE MODEL FOR INDIA (2020)
Working Paper: A Monetary Business Cycle Model for India (2018)
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