Estimating a monetary policy rule for India
This paper investigates whether the seemingly discretionary and flexible approach of the Reserve Bank of India can in practice be described by a Taylor-type rule. It estimates an exchange-rate-augmented Taylor rule for India over the period Quarter 1 of 1980 to Quarter 4 of 2008. It investigates monetary policy changes between the pre- and post-liberalization periods in order to capture the potential impact of macroeconomic structural changes on the RBI's monetary policy conduct. Overall, it finds that the output gap seems to matter more to RBI than inflation, there is greater sensitivity to consumer price inflation, exchange rate changes do not constitute an important policy factor, and the post-1998 conduct of monetary policy seems to have changed in the direction of less inertia.
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- Richard Clarida & Jordi Galí & Mark Gertler, 2000.
"Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory,"
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- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
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- Esanov, Akram & Merkl, Christian & Vinhas de Souza, Lucio, 2005.
"Monetary policy rules for Russia,"
Journal of Comparative Economics,
Elsevier, vol. 33(3), pages 484-499, September.
- John B. Taylor, 2001. "The Role of the Exchange Rate in Monetary-Policy Rules," American Economic Review, American Economic Association, vol. 91(2), pages 263-267, May.
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- Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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