IDEAS home Printed from https://ideas.repec.org/a/idn/journl/v27y2024i3hp573-600.html
   My bibliography  Save this article

India And The Rest Of The World: Analyses Of International Monetary Policy Spillovers

Author

Listed:
  • Afees Adebare Salisu

    (University of Pretoria, Pretoria, South Africa)

Abstract

The US is India’s largest trading partner, followed by the European Union. Our study, using the GVAR model, shows that a US Monetary Policy (MP) shock results in a depreciation of the Indian currency vis-a-vis the dollar. This is due to Indian investors preferring to invest in the US, which provides higher returns during a US MP shock. The Eurozone MP shock does not have a significant impact due to the increasing dollarization of the Indian economy. However, the US MP shock propagation diminishes when there is economic policy uncertainty. Our findings have implications for monetary policy conduct in India.

Suggested Citation

  • Afees Adebare Salisu, 2024. "India And The Rest Of The World: Analyses Of International Monetary Policy Spillovers," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 27(3), pages 573-600, July.
    • Handle: RePEc:idn:journl:v:27:y:2024:i:3h:p:573-600
    DOI: https://doi.org/10.59091/2460-9196.2280
    as

    Download full text from publisher

    File URL: https://bulletin.bmeb-bi.org/cgi/viewcontent.cgi?article=2280&context=bmeb
    Download Restriction: no
    File URL: https://libkey.io/https://doi.org/10.59091/2460-9196.2280?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Qi Deng & Weiguo Xiao & Huan Yan & Miaochao Chen, 2022. "The Spillover Effects of U.S. Monetary Policy Normalization on the BRICS Based on Panel VAR Model," Journal of Mathematics, Hindawi, vol. 2022, pages 1-9, January.
    2. Filippo di Mauro & L. Vanessa Smith & Stephane Dees & M. Hashem Pesaran, 2007. "Exploring the international linkages of the euro area: a global VAR analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 1-38.
    3. Afees A. Salisu & Rangan Gupta & Riza Demirer, 2022. "The financial US uncertainty spillover multiplier: Evidence from a GVAR model," International Finance, Wiley Blackwell, vol. 25(3), pages 313-340, December.
    4. Afees A. Salisu & Rangan Gupta & Abeeb Olaniran, 2023. "The effect of oil uncertainty shock on real GDP of 33 countries: a global VAR approach," Applied Economics Letters, Taylor & Francis Journals, vol. 30(3), pages 269-274, February.
    5. Suhua Tian & Li Wang, 2024. "Global spillover impact of US monetary shocks on China–based on empirical test of GVAR model," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 33(3), pages 462-481, April.
    6. Raymond L. Aor & Afees A. Salisu & Isah J. Okpe, 2021. "A Comparative Assessment of the Global Effects of US Monetary and Fiscal Policy Uncertainty Shocks," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(4), pages 89-114, December.
    7. Chen, Qianying & Filardo, Andrew & He, Dong & Zhu, Feng, 2016. "Financial crisis, US unconventional monetary policy and international spillovers," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 62-81.
    8. Shaghil Ahmed & Ozge Akinci & Albert Queraltó, 2021. "U.S. Monetary Policy Spillovers to Emerging Markets: Both Shocks and Vulnerabilities Matter," Staff Reports 972, Federal Reserve Bank of New York.
    9. Pami Dua, 2023. "Monetary Policy Framework in India," Springer Books, in: Pami Dua (ed.), Macroeconometric Methods, chapter 0, pages 39-72, Springer.
    10. Alexander Chudik & M. Hashem Pesaran, 2013. "Large Panel Data Models with Cross-Sectional Dependence: A Survey," CESifo Working Paper Series 4371, CESifo.
    11. Lakdawala, Aeimit, 2021. "The growing impact of US monetary policy on emerging financial markets: Evidence from India," Journal of International Money and Finance, Elsevier, vol. 119(C).
    12. ter Ellen, Saskia & Jansen, Edvard & Midthjell, Nina Larsson, 2020. "ECB Spillovers and domestic monetary policy effectiveness in small open economies," European Economic Review, Elsevier, vol. 121(C).
    13. Narayan, Paresh Kumar, 2021. "COVID-19 research outcomes: An agenda for future research," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 439-445.
    14. Abdullahi Musa & Afees A. Salisu & Saleh Abulbashar & Chinecherem D. Okoronkwo, 2022. "Oil price uncertainty and real exchange rate in a global VAR framework: a note," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(4), pages 704-712, October.
    15. Tony Zhang, 2022. "Monetary Policy Spillovers through Invoicing Currencies," Journal of Finance, American Finance Association, vol. 77(1), pages 129-161, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Salisu, Afees & Hammed, Yinka S., 2025. "International monetary policy spillovers between Japan and the Rest of the World: A GVAR Framework," MPRA Paper 123529, University Library of Munich, Germany.
    2. Mr. Giovanni Ganelli & Nour Tawk, 2016. "Spillovers from Japan’s Unconventional Monetary Policy to Emerging Asia: a Global VAR approach," IMF Working Papers 2016/099, International Monetary Fund.
    3. Martin Feldkircher & Gabriele Tondl, 2020. "Global Factors Driving Inflation and Monetary Policy: A Global VAR Assessment," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 26(3), pages 225-247, August.
    4. Yahyaei, Hamid & Singh, Abhay & De Mello, Lurion, 2024. "The Federal Reserve’s Quantitative Easing policy and volatility spillovers: Evidence from Australia," International Review of Economics & Finance, Elsevier, vol. 94(C).
    5. Belke, Angar & Gros, Daniel & Osowski, Thomas, 2017. "The effectiveness of the Fed’s quantitative easing policy: New evidence based on international interest rate differentials," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 335-349.
    6. Filardo, Andrew J. & Siklos, Pierre L., 2020. "The cross-border credit channel and lending standards surveys," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 67(C).
    7. Cui, Baisheng & Li, Jiaqi & Zhang, Yi, 2024. "Asymmetries in the international spillover effects of monetary policy: Based on TGVAR model," The North American Journal of Economics and Finance, Elsevier, vol. 69(PA).
    8. Schanne, Norbert, 2015. "A Global Vector Autoregression (GVAR) model for regional labour markets and its forecasting performance with leading indicators in Germany," IAB-Discussion Paper 201513, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    9. Considine, Jennifer & Galkin, Phillip & Hatipoglu, Emre & Aldayel, Abdullah, 2023. "The effects of a shock to critical minerals prices on the world oil price and inflation," Energy Economics, Elsevier, vol. 127(PB).
    10. Anaya, Pablo & Hachula, Michael & Offermanns, Christian J., 2017. "Spillovers of U.S. unconventional monetary policy to emerging markets: The role of capital flows," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 275-295.
    11. Huidan Xue & Chenguang Li & Liming Wang & Wen-Hao Su, 2021. "Spatial Price Transmission and Price Dynamics of Global Butter Export Market under Economic Shocks," Sustainability, MDPI, vol. 13(16), pages 1-24, August.
    12. Feldkircher, Martin & Gruber, Thomas & Huber, Florian, 2020. "International effects of a compression of euro area yield curves," Journal of Banking & Finance, Elsevier, vol. 113(C).
    13. Philipp Galkin & Jennifer Considine & Abdullah Al Dayel & Emre Hatipoglu, 2025. "The Response of Global Oil Inventories to Supply Shocks," Commodities, MDPI, vol. 4(2), pages 1-21, June.
    14. Chen, Qianying & Filardo, Andrew & He, Dong & Zhu, Feng, 2016. "Financial crisis, US unconventional monetary policy and international spillovers," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 62-81.
    15. George N. Apostolakis & Nikolaos Giannellis & Athanasios P. Papadopoulos, 2023. "Macro‐financial effects of monetary policy easing," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(3), pages 715-738, April.
    16. Tiago Araújo & Óscar Afonso & Pedro Cunha Neves & Elena Sochirca, 2025. "International spillovers of unconventional monetary policy: A meta-analysis," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 24(2), pages 205-224, May.
    17. Hajek, Jan & Horvath, Roman, 2018. "International spillovers of (un)conventional monetary policy: The effect of the ECB and the US Fed on non-euro EU countries," Economic Systems, Elsevier, vol. 42(1), pages 91-105.
    18. Inoue, Tomoo & Okimoto, Tatsuyoshi, 2022. "International spillover effects of unconventional monetary policies of major central banks," International Review of Financial Analysis, Elsevier, vol. 79(C).
    19. Lastauskas, Povilas & Nguyen, Anh Dinh Minh, 2024. "Spillover effects of US monetary policy on emerging markets amidst uncertainty," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    20. Tomoo INOUE & Tatsuyoshi OKIMOTO, 2019. "How Does Unconventional Monetary Policy Affect the Global Financial Markets?: Evaluating Policy Effects by Global VAR Models," Discussion papers 19031, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idn:journl:v:27:y:2024:i:3h:p:573-600. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lutzardo Tobing The email address of this maintainer does not seem to be valid anymore. Please ask Lutzardo Tobing to update the entry or send us the correct address or Jimmy Kathon (email available below). General contact details of provider: https://edirc.repec.org/data/bigovid.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.