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Industry Effects of Monetary Policy: Evidence from India

  • Saibal Ghosh

    (Department of Economic Analysis & Policy [DEAP], Reserve Bank of India, Mumbai.)

The study exploits 2-digit level industry data for the period 1981-2004 to ascertain the interlinkage between a monetary policy shock and industry value added. Accordingly, we first estimate a Vector Auto Regression (VAR) model to ascertain the magnitude of a monetary policy shock on industrial output. Subsequently, we try to explain the observed heterogeneity in terms of industry characteristics. The findings indicate that (a) industries exhibit differential response to a monetary tightening and (b) both interest rate and financial accelerator variables tend to be important in explaining the differential response.

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Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.

Volume (Year): 44 (2009)
Issue (Month): 1 (July)
Pages: 89-105

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Handle: RePEc:dse:indecr:v:44:y:2009:i:1:p:89-105
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