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India; Asset Prices and the Macroeconomy

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  • Catriona Purfield

Abstract

This paper examines rising asset prices in India. For the most part, asset prices in India reflect structural factors but the risk of a correction cannot be ruled out. However, at this juncture monetary policy may not be the most effective tool to safeguard financial stability because (i) India's economy is undergoing rapid structural change making it difficult to identify price misalignments; (ii) the macroeconomic impact of an asset price correction is likely to be small; and (iii) the relationship between monetary policy and asset prices is also weak. Targeted changes in financial regulations are better tools to address potential risks.

Suggested Citation

  • Catriona Purfield, 2007. "India; Asset Prices and the Macroeconomy," IMF Working Papers 07/221, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:07/221
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21327
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    References listed on IDEAS

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    1. Catriona Purfield & Hiroko Oura & Charles Kramer & Andreas Jobst, 2008. "Asian equity markets: growth, opportunities, and challenges," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 1(2), pages 227-248.
    2. Jiri Slacalek, 2006. "International Wealth Effects," Discussion Papers of DIW Berlin 596, DIW Berlin, German Institute for Economic Research.
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    Cited by:

    1. Petia Topalova, 2008. "India; Is the Rising Tide Lifting All Boats?," IMF Working Papers 08/54, International Monetary Fund.

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    Keywords

    Asset prices; India; Monetary policy; wealth effects; real estate; stock market; commercial real estate; asset markets; financial assets;

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