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Are there Asymmetric Effects of Monetary Policy in India?

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  • Khundrakpam, Jeevan Kumar

Abstract

The paper attempts to analyse asymmetric effects of monetary policy in India using quarterly data from 1996-97Q1 to 2011-12Q4. It finds that an unanticipated hike and an unanticipated cut in policy rate have a symmetric impact of on real GDP growth, but differentially impact the components of real aggregate demand. While the impact on real investment is symmetric, it is asymmetric on real private and government consumption in that while an unanticipated cut in policy rate leads to their increase, an unanticipated hike in policy rate has no impact on them. The impact on inflation is also symmetric. An anticipated policy rate change also has a negative impact on real GDP growth as well as on the components of real aggregate demand, except for real government consumption. However, there are ranges where anticipated policy rate changes become neutral to components of aggregate demand and, thus, on inflation, ranging from 6.25 per cent to 7.0 per cent.

Suggested Citation

  • Khundrakpam, Jeevan Kumar, 2013. "Are there Asymmetric Effects of Monetary Policy in India?," MPRA Paper 53059, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53059
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    References listed on IDEAS

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    3. Nitin Arora & Shubham Monga & Dilpreet Sharma, 2022. "Coordination of Monetary and Fiscal Policies for Growth with Price Stability in a Post‐COVID‐19 Indian Economy," Economic Papers, The Economic Society of Australia, vol. 41(3), pages 247-259, September.

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    More about this item

    Keywords

    Monetary Policy; Asymmetry; Inflation; Policy Rate;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • 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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