Alternative Monetary Policy Rules for India

Author/Editor:

Muneesh Kapur ; Michael Debabrata Patra

Publication Date:

May 1, 2012

Electronic Access:

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Summary:

This paper empirically evaluates the operational performance of the McCallum rule, the Taylor rule and hybrid rules in India over the period 1996-2011 using quarterly data, with a view to analytically informing the conduct of monetary policy. The results show that forward-looking formulations of both rules and their hybrid version - setting a nominal output growth objective for monetary policy with an interest rate instrument - outperform contemporaneous and backward-looking specifications, especially when targeting core components of GDP and inflation, and combine the best parts of efficiency and discretion.

Series:

Working Paper No. 2012/118

Subject:

Central bank policy rate Financial services Inflation Monetary base Money National accounts Output gap Personal income Prices Production

English

Publication Date:

May 1, 2012

ISBN/ISSN:

9781475503470/1018-5941

Stock No:

WPIEA2012118

Pages:

44

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