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Monetary policy transmission in an emerging market setting

Author

Listed:
  • Bhattacharya, Rudrani

    (National Institute of Public Finance and Policy)

  • Patnaik, Ila

    (National Institute of Public Finance and Policy)

  • Shah, Ajay

    (National Institute of Public Finance and Policy)

Abstract

Some emerging economies have a relatively ineffective monetary policy transmis- sion owing to weaknesses in the domestic financial system and the presence of a large and segmented informal sector. At the same time, small open economies can have a substantial monetary policy transmission through the exchange rate channel. In order to understand this setting, we explore a unified treatment of monetary policy transmission and exchange-rate pass-through. The results for an emerging market, India, suggest that the most effective mechanism through which monetary policy impacts inflation runs through the exchange rate.

Suggested Citation

  • Bhattacharya, Rudrani & Patnaik, Ila & Shah, Ajay, 2011. "Monetary policy transmission in an emerging market setting," Working Papers 11/78, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:11/78
    Note: Working Paper 78, 2011
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    More about this item

    Keywords

    Monetary policy transmission ; Exchange rate pass-through ; Exchange rate regime ; Financial development ; India;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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