Monetary Policy And Aggregate Demand In India: An Analysis Of Post-Reform Period

Deskripsi

This study attempts to quantify the influence of monetary policy on aggregate demand in India during the post reform period (1998-2019). The New Keynesian approach is adopted as the framework for the study. The structural vector auto regression model used in the study revealed that a monetary policy shock leaves its outcome in the macroeconomic variables, viz., output and inflation in inverse order. A shock in policy rate leaves its initial transmission effect on output after two quarters and subsequently influences the price level. The effects of monetary aggregates are confined to the price level. Monetary policy shocks are transmitted to output through the asset price channel while the credit and exchange rate channels are found to be neutral.