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History of monetary policy in India since independence

  • Ashima Goyal

    ()

    (Indira Gandhi Institute of Development Research)

An SIIO paradigm, based on structure and ideas that become engraved in institutions and affect outcomes, is developed to examine and assesses monetary policy in India after independence. Narrative history, data analysis, and reporting of research demonstrate the dialectic between ideas and structure. Exogenous supply shocks are used to identify policy shocks and isolate their effects. It turns out policy was sometimes exceedingly tight when the common understanding was of a large monetary overhang. Fiscal dominance made policy procyclical. But the three factors that cause a loss of monetary autonomy-governments, markets and openness-are moderating each other. Markets moderate fiscal profligacy and global crises moderate markets and openness. Greater current congruence between ideas and structure is improving institutions and contributing to India's better performance.

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Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2011-018.

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Length: 62 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:ind:igiwpp:2011-018
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  1. Ashima Goyal, . "Inflationary Pressures in South Asia," MPDD Working Paper Series WP/11/14, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  2. Ashima Goyal, 2007. "A General equilibrium open economy model for emerging markets: Monetary policy with a dualistic labor market," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2007-016, Indira Gandhi Institute of Development Research, Mumbai, India.
  3. Ashima Goyal, 2006. "Incentives from Exchange Rate Regimes in an Institutional Context," Macroeconomics Working Papers 22375, East Asian Bureau of Economic Research.
  4. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
  5. Reddy, Y. V., 2002. "Lectures on Economic and Financial Sector Reforms in India," OUP Catalogue, Oxford University Press, number 9780195661743, March.
  6. Goyal, Ashima & Dash, Shridhar, 2000. "The Money Supply Process in India: Identification, Analysis and Estimation," MPRA Paper 24632, University Library of Munich, Germany.
  7. Ashima Goyal, 2009. "Financial crises: reducing pro-cyclicality," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 2(1), pages 173-183.
  8. Goyal, Ashima & Pujari, Ayan Kumar, 2005. "Identifying long run supply curve of India," MPRA Paper 24021, University Library of Munich, Germany.
  9. Ashima Goyal, 2007. "Tradeoffs, Delegation and Fiscal-Monetary Coordination in a Developing Economy," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 42(2), pages 141-164, December.
  10. Goyal, Ashima, 2006. "Macroeconomic policy and the exchange rate: working together?," MPRA Paper 27768, University Library of Munich, Germany.
  11. Goyal, Ashima, 2002. "Coordinating monetary and fiscal policies: a role for rules?," MPRA Paper 29200, University Library of Munich, Germany.
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