Transmission mechanism of monetary policy in India

Monetary Transmission Mechanism in India: A Quarterly Model

“…The peak effect of an interest rate shock on output and inflation occurred after 6 months, consistent with evidence of shorter lags in EMEs. The lags are corroborated by Aleem (2010) who find that the peak decline in both GDP and prices occurs in the third quarter after the interest rate shock. Mohanty (2012), using a quarterly structural VAR (SVAR) model, finds that policy rate increases have a negative effect on output and inflation; the peak effect on output growth takes with a lag of two quarters and that on inflation with a lag of three quarters.…”

“…VAR approaches have been used to assess various aspects of transmission, inter alia, in Ray, Joshi and Saggar (1998), Al-Mashat (2003), RBI (2004), Aleem (2010), Bhattacharya et al (2011), andKhundrakpam and. New Keynesian model (NKM) to assess transmission has been estimated in RBI (2002), and Patra and Kapur (2012) and calibrated in Goyal (2008) and Anand et al (2010).…”

Monetary Policy Transmission in an Emerging Market Setting

“…Studies of the monetary policy transmission in emerging economies have primarily explored specific channels of transmission (Jha and Mohanty, 1995;Fung, 2002;Wu et al, 2007). Some studies have also assessed the relative performance of various channels (Cushman and Zha, 1997;Disyatat and Vongsinsirikul, 2003;Golenelli and Rovelli, 2006;Catao and Pagan, 2010;Singh and Kalirajan, 2007;Aleem, 2010), while others focus on the financial strength of the economy (Elbourn and Hann, 2006). A recent contribution to this literature, Mishra et al (2010), finds strong evidence of a weak monetary policy transmission in emerging economies.…”

An Empirical Analysis of the Monetary Transmission Mechanism of Developing Economies: Evidence from Ghana

“…Policy makers need a clear understanding of the monetary transmission mechanism in order to accurately assess the timing and effect of policy measures on the economy. There are differences in these mechanisms among countries because of their different legal and financial structures (Aleem, 2010). Even though there have been a number of empirical studies of monetary transmission mechanisms in developing countries, structural and economic reforms being embarked upon by these economies necessitate an unrelenting study into their monetary transmission mechanisms.…”