Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128520
Authors: 
Carrasco, Bruno
Mukhopadhyay, Hiranya
Year of Publication: 
2014
Series/Report no.: 
ADB Economics Working Paper Series 393
Abstract: 
This paper reviews some of the more critical policy dilemmas facing the Reserve Bank of India (RBI) in its pursuit of inflation stabilization and balanced growth objectives. The challenge in meeting these objectives further increased in the mid-2000s with the advent of large capital flows into the country and with RBI's role in preserving financial stability. The paper argues, drawing on several empirical results including Taylor rule estimation and nonparametric regression, that there is no simple policy solution to apply in different states of the market and reviews policy decisions undertaken by RBI against the backdrop of a disequilibrium framework where credit markets may be demand or supply constrained. Superimposing two capital flow regimes into this framework leads to identification of episodes where a hawkish (anti-inflationary) stance can give way to a dovish(pro-growth) stance.
Subjects: 
India
monetary policy dilemmas
central bank
RBI policies
price stability
financial stability
Taylor rule
credit market disequilibrium
JEL: 
E50
E52
E58
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/3.0/igo/
Document Type: 
Working Paper

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