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Effects Of Monetary Shocks On Exchange Rate: Empirical Evidence From India

Listed author(s):
  • SHARMA Chandan

    (Indian Institute of Management Lucknow, India)

  • SETIA Rajat

    (National Institute of Financial Management, India)

This paper examines the effect of monetary policy shocks on exchange rate in a Multiple Indicator Approach (MIA) framework. This study has employed a monetary policy index of key monetary policy instruments in India (Bank rate, Cash Reserve Ratio, Repo and Reverse Repo rates). The study finds the empirical evidence for puzzling behavior of price level and exchange rate. Both price and exchange rate increase initially in response to a contractionary policy shock. Policy shocks affect output, inflation and exchange rate to an appreciable extent over a forecasting horizon of one year.

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File URL: http://eccsf.ulbsibiu.ro/RePEc/blg/journl/12215sharma&setia.pdf
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Article provided by Lucian Blaga University of Sibiu, Faculty of Economic Sciences in its journal Studies in Business and Economics.

Volume (Year): 12 (2017)
Issue (Month): 2 (August)
Pages: 206-219

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Handle: RePEc:blg:journl:v:12:y:2017:i:2:p:206-219
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Lucian Blaga University of Sibiu, Faculty of Economic Sciences Dumbravii Avenue, No 17, postal code 550324, Sibiu, Romania

Phone: 004 0269 210375
Fax: 004 0269 210375
Web page: http://economice.ulbsibiu.ro/
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  27. Georgy Ganev & Krisztina Molnar & Krzysztof Rybinski & Przemyslaw Wozniak, 2002. "Transmission Mechanism of Monetary Policy in Centraland Eastern Europe," CASE Network Reports 0052, CASE-Center for Social and Economic Research.
  28. Ben S.C. Fung, 2002. "A VAR analysis of the effects of monetary policy in East Asia," BIS Working Papers 119, Bank for International Settlements.
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