Examining the trade-off between price and financial stability in India
Ila Patnaik (),
Shalini Mittal () and
Radhika Pandey ()
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Shalini Mittal: National Institute of Public Finance and Policy
Working Papers from National Institute of Public Finance and Policy
In recent years, many emerging economies including India have adopted inflation targeting framework. Post the global financial crisis, there is a growing debate on whether monetary policy should target financial stability. Using India as a case study, we present an empirical approach to assess whether monetary policy can target financial stability. This is done by examining the trade-off between price and financial stability for India. Using correlation between price and financial cycles, we find that a trade-off exists between price and financial stability. Our finding is robust to a series of robustness checks. Our study has implications for the conduct of monetary policy in emerging economies. Presence of a trade-off may constrain the ability of a central bank in emerging economies to target financial stability with monetary policy instrument.
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: Working Paper 248, 2019
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Working Paper: Examining the Trade-Off Between Price and Financial Stability in India (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:npf:wpaper:19/248
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