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Alternative Monetary Policy Rules for India

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  • Muneesh Kapur
  • Michael Debabrata Patra

Abstract

This paper empirically evaluates the operational performance of the McCallum rule, the Taylor rule and hybrid rules in India over the period 1996-2011 using quarterly data, with a view to analytically informing the conduct of monetary policy. The results show that forward-looking formulations of both rules and their hybrid version - setting a nominal output growth objective for monetary policy with an interest rate instrument - outperform contemporaneous and backward-looking specifications, especially when targeting core components of GDP and inflation, and combine the best parts of efficiency and discretion.

Suggested Citation

  • Muneesh Kapur & Michael Debabrata Patra, 2012. "Alternative Monetary Policy Rules for India," IMF Working Papers 2012/118, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/118
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    References listed on IDEAS

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