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Transmission mechanism of monetary policy in India

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  • Aleem, Abdul

Abstract

This paper examines the transmission mechanism of monetary policy in India. Considering the external constraints on monetary policy, it estimates a series of vector autoregression models to examine the effects of an unanticipated monetary policy tightening on the real sector. The empirical results suggest that the lending rate initially increases in response to a monetary tightening. Banks play an important role in the transmission of monetary policy shocks to the real sector.

Suggested Citation

  • Aleem, Abdul, 2010. "Transmission mechanism of monetary policy in India," Journal of Asian Economics, Elsevier, vol. 21(2), pages 186-197, April.
    • Handle: RePEc:eee:asieco:v:21:y:2010:i:2:p:186-197
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