NIPFP Working Paper 78
[PDF]
Rudrani Bhattacharya, Ila Patnaik and Ajay Shah
January 2011
Abstract
Some emerging economies have a relatively ineffective monetary policy transmission 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.
Monday, January 24, 2011
Monetary Policy Transmission in an Emerging Market Setting
