IMF Working Papers

Monetary Transmission in Developing Countries: Evidence from India

By Prachi Mishra, Peter J Montiel, Rajeswari Sengupta

August 8, 2016

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Prachi Mishra, Peter J Montiel, and Rajeswari Sengupta. Monetary Transmission in Developing Countries: Evidence from India, (USA: International Monetary Fund, 2016) accessed December 3, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We examine the strength of monetary transmission in India, using a conventional structural VAR methodology. We find that a tightening of monetary policy is associated with a significant increase in bank lending rates and conventional effects on the exchange rate, though pass-through to lending rates is only partial and exchange rate effects are weak. We could find no significant effects on real output or the inflation rate. Though the message for the effectiveness of monetary transmission in India is therefore mixed, our results for India are more favorable than is often found for other developing countries.

Subject: Bank credit, Banking, Central bank policy rate, Exchange rate arrangements, Exchange rates, Financial services, Foreign exchange, Money, Reverse repo rates

Keywords: Aggregate demand, Bank credit, Bank lending, Central and Eastern Europe, Central bank policy rate, Contractionary monetary policy, Exchange rate arrangements, Exchange rates, Global, India, Interest rate, Monetary policy, Monetary policy shock, Monetary policy variable, Reaction function, Reverse repo, Reverse repo rates, Taylor-type monetary policy rule, WP

Publication Details

  • Pages:

    68

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2016/167

  • Stock No:

    WPIEA2016167

  • ISBN:

    9781475523966

  • ISSN:

    1018-5941

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