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RBI’s Efforts towards ‘Pandexit’ Go beyond Policy Measures

Vol. 56, Issue No. 42, 16 Oct, 2021
K Srinivasa Rao

In a proactive move, the Reserve Bank of India rescued the economy with its innovative—blended conventional and unconventional—monetary policy measures. Low-interest rates, aligning targeted liquidity, and granting moratorium coupled with forbearance to enable banks to restructure loans, mandated the Kamath panel to work out modalities to restructure corporate sector loans. After affirming stability and orderliness of the financial sector throughout the crisis period, it rightly signalled descent towards normalisation paving for pandexit manoeuvring the tool of variable reverse repo rate.

Why Are the Long-term US Treasury Yields Falling?

Vol. 56, Issue No. 29, 17 Jul, 2021
T Sabri Öncü

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Worrisome Trends in Inflation and Unemployment

Vol. 56, Issue No. 26-27, 26 Jun, 2021

Both the problems will further hurt the disadvantaged groups and push more people into poverty.

Inflation and Terms-of-trade

Vol. 56, Issue No. 20, 15 May, 2021
Subhasankar Chattopadhyay

This paper argues that, over the longer run, the intertemporal path of inflation in an economy is affected by secular changes in the inter-sectoral terms-of-trade, which in turn, is closely linked to the stages of structural change. This linkage is investigated through simple devices of consumer choice and growth. Results imply that monetary authorities’ inflation targets should optimally account for such secular changes in the terms-of-trade, over and above the terms-of-trade shocks observed typically in developing economies.

 

Evolving Contours of Monetary Policy

Vol. 56, Issue No. 20, 15 May, 2021
C Rangarajan

Monetary policy has emerged as an important tool of economic policy both in developed and developing economies. The monetary and financial system is far more complex today than it has been in the past. Financial intermediation has reached a high level of sophistication, which has itself become a source of concern. The impact of monetary policy action can be transmitted through a variety of channels, some of which though recognised in the past, have become more important. While the traditional issues such as the objectives of monetary policy and the possible trade-off among them remain relevant, they need to be related to the far-reaching changes in the institutional environment at home and abroad. The changing objectives of monetary policy, newly evolving instruments of monetary control and the transmission mechanism and issues related to autonomy in the pursuit of monetary policy are examined.

 

The Wood and Some Trees

Vol. 56, Issue No. 20, 15 May, 2021
Partha Ray

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Surging Wholesale Prices

Vol. 56, Issue No. 17, 24 Apr, 2021

Persistent pickup in food and manufactured goods prices will increase downside risks to recovery.

 

A Performance Appraisal of the Inflation Targeting Regime

Vol. 56, Issue No. 15, 10 Apr, 2021
Partha Ray

The recently published Report on Currency and Finance, 2020–21 of the Reserve Bank of India reviewed the performance of the flexible inflation targeting regime in India. In the light of stylised facts, cross-country experience, and detailed econometric results, the report seemed to suggest that despite several shocks (like demonetisation or introduction of the goods and services tax), a combination of good policy and luck have worked in favour of the success of the FIT regime in India. Going forward, while advocating some nuanced, subtle changes in the operation and administration of the FIT regime, the report called for its continuation as a strategy of monetary policy in India.

 

Time-varying Effect of Inflation Uncertainty

Vol. 56, Issue No. 4, 23 Jan, 2021
Ashutosh Kumar Tripathi

This paper investigates the effect of the uncertainty associated with the inflation, on inflation over time using the monthly wholesale price index data for the time period 1964–2016 and applying a stochastic volatility in mean model with the time-varying parameter. The evidence indicates a mixed impact as both positive and negative estimates are obtained.

Inflation Convergence and Anchoring of Expectations in India

Vol. 55, Issue No. 47, 28 Nov, 2020
Ashima Goyal, Prashant Parab

Careful research on the inflation targeting regime’s impact on anchoring inflation expectations, as well as an empirical examination of convergence, is used to assess the direction of convergence between core and headline inflation, as well as the efficacy of the expectation channel compared to the aggregate demand channel of monetary transmission. There is evidence of more anchoring, with the Reserve Bank of India communications as well as headline inflation affecting short-run inflation expectations and core inflation dominating in the long run.

In Search of Optimal Inflation

Vol. 55, Issue No. 42, 17 Oct, 2020
Sartaj Rasool Rather

The impact of inflation on dispersion of relative prices is examined in a cointegration framework using a data set of all seven components of the consumer price index from India. The empirical evidence indicates that the dispersion of relative price increases with an increase in deviation of inflation from a certain threshold rate in either direction but not with inflation per se, as is traditionally believed. The crucial inference that emerges from the empirical findings is the presence of a threshold inflation rate corresponding to which the dispersion of relative prices is minimised, and this threshold turns out to be 5%.

Minimum Support Price and Inflation in India

Vol. 53, Issue No. 47, 01 Dec, 2018
S Mohanakumar, Premkumar

The Monetary Policy Committee of the Reserve Bank of India revised the policy rates upward consecutively for the second time in 2018. While revising the repo rates to 6.5%, the MPC placed the onus on the recently announced minimum support price for agricultural commodities, alleging that it might fi rm up rural demand and drive up the price level in the economy. But is this threat of price spiral due to MSP hike a reality?

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