<abstract xmlns="http://www.w3.org/1999/xhtml"><p> This paper examines the effect of monetary policy shocks on exchange rate in a Multiple Indicator Approach (MIA) framework. This study has employed a monetary policy index of key monetary policy instruments in India (Bank rate, Cash Reserve Ratio, Repo and Reverse Repo rates). The study finds the empirical evidence for puzzling behavior of price level and exchange rate. Both price and exchange rate increase initially in response to a contractionary policy shock. Policy shocks affect output, inflation and exchange rate to an appreciable extent over a forecasting horizon of one year.</p></abstract>

This paper examines the effect of monetary policy shocks on exchange rate in a Multiple Indicator Approach (MIA) framework. This study has employed a monetary policy index of key monetary policy instruments in India (Bank rate, Cash Reserve Ratio, Repo and Reverse Repo rates). The study finds the empirical evidence for puzzling behavior of price level and exchange rate. Both price and exchange rate increase initially in response to a contractionary policy shock. Policy shocks affect output, inflation and exchange rate to an appreciable extent over a forecasting horizon of one year.

Effects of Monetary Shocks on Exchange Rate: Empirical Evidence from India

Studies in Business and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Effects of Monetary Shocks on Exchange Rate: Empirical Evidence from India"}

This paper examines the effect of monetary policy shocks on exchange rate in a Multiple Indicator Approach (MIA) framework. This study has employed a monetary...

Effects of Monetary Shocks on Exchange Rate: Empirical Evidence from India

Published Online: Oct 21, 2017

Page range: 206 - 219

DOI: https://doi.org/10.1515/sbe-2017-0030

Keywords
Monetary Policy Transmission, Exchange rate, Impulse Response

© 2017

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Effects of Monetary Shocks on Exchange Rate: Empirical Evidence from India

Published Online: Oct 21, 2017

Page range: 206 - 219

DOI: https://doi.org/10.1515/sbe-2017-0030

KeywordsMonetary Policy Transmission, Exchange rate, Impulse Response

© 2017

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
Monetary Policy Transmission, Exchange rate, Impulse Response