INDIA AND THE REST OF THE WORLD: ANALYSES OF INTERNATIONAL MONETARY POLICY SPILLOVERS

Afees Salisu

Bulletin of Monetary Economics and Banking, 2024, vol. 27, issue 3, 573-600

Abstract: The US is India’s largest trading partner, followed by the European Union. Our study, using the GVAR model, shows that a US Monetary Policy (MP) shock results in a depreciation of the Indian currency vis-a-vis the dollar. This is due to Indian investors preferring to invest in the US, which provides higher returns during a US MP shock. The Eurozone MP shock does not have a significant impact due to the increasing dollarization of the Indian economy. However, the US MP shock propagation diminishes when there is economic policy uncertainty. Our findings have implications for monetary policy conduct in India.

Keywords: Monetary policy; Spillovers; Global VAR; Exchange rate; Economic policy uncertainty; India (search for similar items in EconPapers)
JEL-codes: C10 D81 E52 F31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:27:y:2024:i:3h:p:573-600

DOI: 10.59091/2460-9196.2280

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