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Commodity futures prices pass-through and monetary policy in India: Does asymmetry matter?

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  • Roy, Rudra Prosad
  • Sinha Roy, Saikat

Abstract

Like many other emerging market economies, India is practising flexible inflation targeting through monetary policy. As the success of inflation targeting regime largely depends upon the ability of the central bank to predict the future path of inflation accurately, it is important to identify the predictors of inflation. The paper empirically examines the informational role of commodity futures prices for monetary policy in India considering the possible presence of asymmetries. Employing the Nonlinear Autoregressive Distributed Lag (NARDL) as estimation strategy, this study is probably the first attempt to examine the asymmetric relationship between commodity futures prices and macroeconomic variables relevant to monetary policymaking. The results are expected to assume significance for the policymakers as the presence of pass-through effects of commodity futures prices confirms its role as an information variable in the process of monetary policy making in India.

Suggested Citation

  • Roy, Rudra Prosad & Sinha Roy, Saikat, 2022. "Commodity futures prices pass-through and monetary policy in India: Does asymmetry matter?," The Journal of Economic Asymmetries, Elsevier, vol. 25(C).
    • Handle: RePEc:eee:joecas:v:25:y:2022:i:c:s1703494921000347
    DOI: 10.1016/j.jeca.2021.e00229
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    More about this item

    Keywords

    Commodity futures prices; Asymmetry; Inflation; Monetary policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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