An Augmented Taylor rule for India’s Monetary Policy: Does Governor Regime Matters?

Biswabhusan Bhuyan and Dinabandhu Sethi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examined the monetary policy stance in India during the governors’ regime of Jalan- Reddy-Subbarao- Rajan. An Augmented Taylor Rule is employed to estimate monetary policy response for each period using monthly data. The results revealed that the governor regime matters in the monetary policy response. When output gap has been an important concern during Jalan, Subbarao and Rajan’s period, inflation remained a major concern for Reddy and Rajan’s regime. Interestingly, the interest rate is highly responsive to changes in exchange rate during Rajan period. These findings are consistent with the conditions of economy during those periods. In addition, the exchange rate and output gap remained a greater concern for policy maker in post-crisis period. Nevertheless, we find policy inertia during all regimes.

Keywords: Monetary policy; Taylor’s rule; Inflation; Output gap; Hodrick-Prescott filter (search for similar items in EconPapers)
JEL-codes: C22 E52 E58 (search for similar items in EconPapers)
Date: 2016-12-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/75287/1/MPRA_paper_75287.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:75287

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().