Industry Effects of Monetary Policy: Evidence from India

Saibal Ghosh

Indian Economic Review, 2009, vol. 44, issue 1, 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.

Keywords: Industry; Monetary Policy; Interest Rate Channel; Financial Accelerator; Vector Auto Regression. (search for similar items in EconPapers)
JEL-codes: E52 L60 P20 (search for similar items in EconPapers)
Date: 2009
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