Monetary policy transmission in an emerging market setting
AbstractSome 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.
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Bibliographic InfoPaper provided by National Institute of Public Finance and Policy in its series Working Papers with number 11/78.
Date of creation: Jan 2011
Date of revision:
Note: Working Paper 78, 2011
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Monetary policy transmission ; Exchange rate pass-through ; Exchange rate regime ; Financial development ; India;
Other versions of this item:
- Ila Patnaik & Ajay Shah & Rudrani Bhattacharya, 2011. "Monetary policy transmission in an emerging market setting," IMF Working Papers 11/5, International Monetary Fund.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-12 (All new papers)
- NEP-CBA-2011-02-12 (Central Banking)
- NEP-MAC-2011-02-12 (Macroeconomics)
- NEP-MON-2011-02-12 (Monetary Economics)
- NEP-OPM-2011-02-12 (Open Economy Macroeconomic)
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