Measuring Monetary Policy Shocks in Emerging Economies: Evidence from India

Aeimit Lakdawala and Rajeswari Sengupta

Journal of Money, Credit and Banking, 2025, vol. 57, issue 2-3, 407-437

Abstract: In this paper, we provide a template for constructing monetary policy shocks for emerging economies. Our approach synthesizes financial data with a narrative analysis of central bank communication and related media coverage. We create a publicly available time‐series database of policy dates and shocks for the Reserve Bank of India (RBI). Our shocks suggest that financial markets infer information about the future path of policy rate from RBI communication. Bond and stock markets react strongly to these monetary shocks but exhibit heterogeneity across governor regimes. Finally, we use the shocks as external instruments to identify the impact on macro‐economic variables.

Date: 2025
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https://doi.org/10.1111/jmcb.13144

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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:57:y:2025:i:2-3:p:407-437

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