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

Emerging Market EconomiesSubscribe to Emerging Market Economies

Vulnerability of Emerging Market Economies to Exogenous Shocks

The transmission of global demand, oil supply and monetary policy shocks on the Indian economy are empirically examined using a parsimonious structural vector autoregression model for the period 1996 to 2016. Global demand shocks exert the most dominant effect causing fluctuations in various macroeconomic variables, whereas global monetary policy spillovers play an important role in affecting domestic short-term interest rates and financial asset prices. Global oil supply shocks, given its relative weightage as an intermediate input, have a greater impact on wholesale price index inflation than on consumer price index inflation. Given the rising trade and financial integration of the Indian economy, a quantitative impact analysis of these global shocks assumes importance for macroeconomic and monetary policy frameworks.

IMF's Call for Complacence

The International Monetary Fund's World Economic Outlook of April 2016 bodes that emerging market economies, including India, are at risk of sudden capital outflows. The IMF once again makes a case for its conventional, much-discredited tools to manage this risk. To repeat these recommendations, that on many occasions have only worsened crises, is to encourage complacency.
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