IMF Working Papers

Alternative Monetary Policy Rules for India

By Muneesh Kapur, Michael Debabrata Patra

May 1, 2012

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Muneesh Kapur, and Michael Debabrata Patra. Alternative Monetary Policy Rules for India, (USA: International Monetary Fund, 2012) accessed December 21, 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

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.

Subject: Central bank policy rate, Financial services, Inflation, Monetary base, Money, National accounts, Output gap, Personal income, Prices, Production

Keywords: Central bank, Central bank policy rate, Global, India, Inflation, Inflation gap, McCallum Rule, Monetary base, Monetary Policy, Monetary Policy Reaction Function, Neutral Interest Rate, Output gap, Personal income, Policy instrument, Policy rule, Principle result, Rate of growth, Reaction function, Real rate of interest, Reverse repo, Taylor Rule, WP, WPI inflation

Publication Details

  • Pages:

    44

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2012/118

  • Stock No:

    WPIEA2012118

  • ISBN:

    9781475503470

  • ISSN:

    1018-5941