Monetary Policy Communication and Financial Markets in India

Ahmed, S Faisal; Binici, Mahir; Turunen, Jarkko

doi:10.5089/9798400224430.001

Cited by 4 publications

(1 citation statement)

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“…Monetary policy should focus on ensuring price stability, while communication can be enhanced to reduce uncertainty and help guiding market expectations. Ahmed, Binici, and Turunen (2022) found that Reserve Bank of India's forward guidance played an important role in moderating uncertainty and supporting asset prices during the pandemic.…”

Section: Monetary and Fiscal Policy Based On Clear Communication And ...mentioning

confidence: 99%

India’s Financial System

2023

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DISCLAIMER:The views expressed in this book are those of the authors and do not necessarily represent the views of the IMF's Executive Directors, its management, or any of its members. The boundaries, colors, denominations, and any other information shown on the maps do not imply, on the part of the International Monetary Fund, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries.

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Section: Monetary and Fiscal Policy Based On Clear Communication And ...mentioning

confidence: 99%

India’s Financial System

2023

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Impact of RBI’s monetary policy announcements on government bond yields: evidence from the pandemic

2023

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We investigate how the bond market responded to the Reserve Bank of India’s (RBI) monetary policy actions undertaken since the start of the pandemic. Our approach involves combining a narrative analysis of the media coverage together with an event-study framework around RBI’s monetary policy announcements. We find that the RBI’s actions early in the pandemic were helpful in providing an expansionary impulse to the bond market. Specifically, long-term bond interest rates would have been meaningfully higher in the early months of the pandemic if not for the actions undertaken by the RBI. These actions involved unconventional policies providing liquidity support and asset purchases. We find that some of the unconventional monetary policy actions had a substantial signaling channel component where the market perceived the announcement of an unconventional monetary policy action as representing a lower future path for the short-term policy rate. We also find that the RBI’s forward guidance was more effective in the pandemic than it had been in the couple of years preceding the pandemic.

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