ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Himanshu JoshiSubscribe to Himanshu Joshi

Liquidity Effects on Term Structure of Government Securities

An empirical examination of the term structure of interest rates in the Indian economy suggests cointegration (or long run stable relationship) among interest rates but existence of multiple common trends. The absence of a unique common trend implies that long run movements of any one interest rate are not dominated by the movements of the other interest rates. The presence of cointegration, however, suggests a long run interlocking of interest rates across markets and a possibility of their common response to changes in expectations about future monetary policy and/or economic fundamentals. The interrelationship between transitory (cyclical) components of interest rates reveals that yields, especially, of dated government of India (GOI) securities became closely aligned to money market conditions beginning from the second half of the calendar year 1996. Since short-term transitory components often stem from policy impulses, the closer synchronisation of the said yields with call money rates observed during this period could, perhaps, be attributed to the Reserve Bank of India (RBI) decisions to integrate the two markets by allowing primary dealers to participate in the interbank call money market.

New Monetary Transmission Channels-Role of Interest Rates and Exchange Rate in Conduct of Indian Monetary Policy

Role of Interest Rates and Exchange Rate in Conduct of Indian Monetary Policy Partha Ray Himanshu Joshi Mridul Saggar This paper explores new dimensions in the monetary transmission mechanism in the environment of liberalisation initiated in the early 1990s and in the context of growing integration of financial markets. An examination of the Chakravarty Committee paradigm in this changed milieu motivated us to see the role of two key variables in the conduct of monetary policy, viz, interest rates and exchange rates. The long-run relationship between money, prices, output, and exchange rate is examined and the impact of money market disequilibrium on interest rate is traced by testing the joint significance of the lags of disequilibrium errors. We also conduct weak and block exogenity tests for exchange rates. Interest rates and exchange rates are seen to be endogenously determined in the liberalised regime beginning 1992-93, raising the possibility of the change in transmission mechanism following the advent of financial reforms. The recent shifts in the operating procedure of monetary policy are in consonance with our findings.

Growth-Inflation Trade-off-Empirical Estimation of Threshold Rate of Inflation for India

Empirical Estimation of Threshold Rate of Inflation for India R Kannan Himanshu Joshi The empirical analysis of growth-inflation trade-off has received keen attention in macro-economic research in the recent years. Even as it is generally argued that inflation is not good for growtht some investigators have pointed out that the negative effect is pronounced and serious only if inflation breaches its specific threshold rate for a country in question.
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