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India And The Rest Of The World: Analyses Of International Monetary Policy Spillovers

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  • Afees Adebare Salisu

    (University of Pretoria, Pretoria, South Africa)

Abstract

The US is India’s largest trading partner, followed by the European Union. Our study, using the GVAR model, shows that a US Monetary Policy (MP) shock results in a depreciation of the Indian currency vis-a-vis the dollar. This is due to Indian investors preferring to invest in the US, which provides higher returns during a US MP shock. The Eurozone MP shock does not have a significant impact due to the increasing dollarization of the Indian economy. However, the US MP shock propagation diminishes when there is economic policy uncertainty. Our findings have implications for monetary policy conduct in India.

Suggested Citation

  • Afees Adebare Salisu, 2024. "India And The Rest Of The World: Analyses Of International Monetary Policy Spillovers," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 27(3), pages 573-600, July.
    • Handle: RePEc:idn:journl:v:27:y:2024:i:3h:p:573-600
    DOI: https://doi.org/10.59091/2460-9196.2280
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary policy; Spillovers; Global VAR; Exchange rate; Economic policy uncertainty; India;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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