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

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A Horse Race among the Alternative Taylor Rule Specifications

The paper estimates a slew of augmented Taylor rule specifications using call and treasury bill rates. After accounting for break points, we calculate the output gap based on a single-index dynamic factor extracted from monthly high-frequency indicators that are representative of broad sectoral activity. In our study, we found that interest rates in India are mostly in line with the augmented Taylor rule specifications after the Reserve Bank of India started using flexible inflation targeting.

Monetary Fiscal Coordination and the Evolution of Public Debt

Using an accounting framework, this article simulates the evolution of the debt ratio based on four policy interventions. It recommends pursuing an expansionary monetary policy combined with an equally active and complementary fi scal policy. The article also says that monetary policy should target the debt ratio, while fi scal policy should target output.

Is the Economy Heading towards Stagflation?

Erratic fiscal and monetary policies tend to slow down growth and fuel inflation.

Reviving the Lending Appetite of Banks

The flow of bank credit is crucial to revive the economy. The fear of potential asset quality woes has reduced the risk appetite of banks. Going beyond the restructuring support, banks need policy support by relaxations in prudential norms in the near term to be normalised in the next four–fi ve years. Coping with the adversities of the pandemic needs a collaborative policy support of all stakeholders to step up the lending appetite.

Price Risk of Central Government Securities in India

The study examines the determinants of price risk of the central government securities in India using their daily trading data comprising of 81,384 observations during the period 2011 to 2020. The study finds that the high coupon bonds witness a moderate rise in prices compared to lower coupon...

Evolving Contours of Monetary Policy

Monetary policy has emerged as an important tool of economic policy both in developed and developing economies. The monetary and financial system is far more complex today than it has been in the past. Financial intermediation has reached a high level of sophistication, which has itself become a source of concern. The impact of monetary policy action can be transmitted through a variety of channels, some of which though recognised in the past, have become more important. While the traditional issues such as the objectives of monetary policy and the possible trade-off among them remain relevant, they need to be related to the far-reaching changes in the institutional environment at home and abroad. The changing objectives of monetary policy, newly evolving instruments of monetary control and the transmission mechanism and issues related to autonomy in the pursuit of monetary policy are examined.

Time-varying Effect of Inflation Uncertainty

Inflation remains a major concern for every economy. High inflation is generally believed to be costly because it makes the price mechanism a less effective apparatus in allocating resources efficiently (Friedman 1977). One of the most remarkable macroeconomic developments over the past two decades...

RBI’s Subservience to the Government Is Systemic, Not Ideological

The autonomous functioning of the Reserve Bank of India has been, if anything, an exception rather than the rule.

On Monetary Economics

Monetary Policy in India: A Modern Macroeconomic Perspective edited by Chetan Ghate and Kenneth M Kletzer, Springer, 2016; pp xiii+652, price not indicated.

How Did Central Bank Independence Become the Norm?

Priests of Prosperity: How Central Bankers Transformed the Postcommunist World by Juliet Johnson, New Delhi: Speaking Tiger, 2016; pp xv+292, ₹995.

RBI’s Interest Rate Policy and Durable Liquidity Question

The Reserve Bank of India should take into consideration longer term liquidity management for smooth monetary transmission. It must clearly define “durable liquidity” in the form of some quantitative variable and set its desired path for one year or so. This will anchor expectations on future interest rate and liquidity premium, and certainly improve the link between the interest rates in various terms to maturity. Moreover, the desired target for durable liquidity can also serve to improve overall monetary policy effectiveness.

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