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Channels of Monetary Policy Transmission in India: A Post-Reforms Macro-econometric Analysis

Indian Journal of Industrial Relations

Volume 55 Issue 3

Published: 2020
Author(s) Name: Ramandeep Kaur | Author(s) Affiliation: Research Scholar, Department of Economics, Panjab University, Chandigarh
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Abstract

This paper examines the effectiveness and relative strength of various channels of monetary policy transmission in India during the post reform period using the monthly data spanning over 1991:M4 to 2017:M12. The analysis has been via regular and seasonal unit root methods and graphical method has been applied for identification of structural breaks. Alternative methods namely, HEGY, Augmented Dickey Fuller (ADF), Phillips-Perron (PP), KPSS and DF-GLS have been applied for testing the presence of seasonal and regular unit roots. The long-run and short-run behaviors of different channels have been analyzed through Structural Vector Error Correction Model (VECM). In India, first and second important channels of monetary policy transmission mechanism are Credit and Interest rate.

Keywords: N.A.

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