Description

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.

Taxonomy

Banks and banking , Central banks , Economic policy , Financial institutions and markets , Monetary policy

More publications in this series: Working Papers

More publications by: Michael Debabrata Patra ; Muneesh Kapur