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Monetary Policy And Aggregate Demand In India: An Analysis Of Post-Reform Period

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  • Prem Kumar

    (Jaipur and Central University of Rajasthan, India)

Abstract

This study attempts to quantify the influence of monetary policy on aggregate demand in India during the post reform period (1998-2019). The New Keynesian approach is adopted as the framework for the study. The structural vector auto regression model used in the study revealed that a monetary policy shock leaves its outcome in the macroeconomic variables, viz., output and inflation in inverse order. A shock in policy rate leaves its initial transmission effect on output after two quarters and subsequently influences the price level. The effects of monetary aggregates are confined to the price level. Monetary policy shocks are transmitted to output through the asset price channel while the credit and exchange rate channels are found to be neutral.

Suggested Citation

  • Prem Kumar, 2023. "Monetary Policy And Aggregate Demand In India: An Analysis Of Post-Reform Period," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(4), pages 659-692, November.
    • Handle: RePEc:idn:journl:v:26:y:2023:i:4g:p:659-692
    DOI: https://doi.org/10.59091/2460-9196.1643
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    More about this item

    Keywords

    Monetary policy; Post reform period; Structural VAR; Policy rate shock;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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