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Policy Actions and Outcomes

In: History of Monetary Policy in India Since Independence

Author

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  • Ashima Goyal

    (Indira Gandhi Institute of Development Research (IGIDR))

Abstract

The SIIO paradigm is developed further showing how the structure, ideasIdeas , and institutionsInstitutions analyzed in Chap. 1 affected Indian monetary policyMonetary policy outcomes. An aggregate demand–supply framework derived from forward-looking optimization subject to Indian structural constraints is able to explain growthGrowth and inflation outcomes given policy actions. Exogenous supply shocks are used to identify policy shocks and isolate their effects. It turns out policy was often procyclical and sometimes excessively tight when the common understanding is there was a large monetary overhang. But the three factors that cause a loss of monetary autonomyMonetary policy autonomy —governments, markets, and openness—are moderating each other. Open markets moderate fiscal profligacy and dominance. Global crises moderate markets and openness as they encourage greater caution. More congruence between ideasIdeas and structure is improving institutions and contributing to India’s better performance.

Suggested Citation

  • Ashima Goyal, 2014. "Policy Actions and Outcomes," SpringerBriefs in Economics, in: History of Monetary Policy in India Since Independence, edition 127, chapter 0, pages 33-74, Springer.
    • Handle: RePEc:spr:spbchp:978-81-322-1961-3_2
    DOI: 10.1007/978-81-322-1961-3_2
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    Cited by:

    1. Jagjit Chadha & Young-Kwan Kang, 2016. "Finance and Credit in a Model of Monetary Policy," National Institute of Economic and Social Research (NIESR) Discussion Papers 471, National Institute of Economic and Social Research.

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