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Monetary policy transmission in an emerging market setting

  • Bhattacharya, Rudrani

    ()

    (National Institute of Public Finance and Policy)

  • Patnaik, Ila

    ()

    (National Institute of Public Finance and Policy)

  • Shah, Ajay

    ()

    (National Institute of Public Finance and Policy)

Some emerging economies have a relatively ineffective monetary policy transmis- sion owing to weaknesses in the domestic financial system and the presence of a large and segmented informal sector. At the same time, small open economies can have a substantial monetary policy transmission through the exchange rate channel. In order to understand this setting, we explore a unified treatment of monetary policy transmission and exchange-rate pass-through. The results for an emerging market, India, suggest that the most effective mechanism through which monetary policy impacts inflation runs through the exchange rate.

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Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number 11/78.

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Length: 22
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:npf:wpaper:11/78
Note: Working Paper 78, 2011
Contact details of provider: Web page: http://www.nipfp.org.in

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