Uncertainty and Effectiveness of Monetary Policy: A Bayesian Markov Switching-VAR Analysis
| Autor: | Bandi Kamaiah, Zulquar Nain |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
Macroeconomics
Economics and Econometrics 050208 finance Markov chain HG1501-3550 Strategy and Management 05 social sciences Bayesian probability Monetary policy monetary policy india Developing country Banking Empirical research e320 e310 0502 economics and business Economics e400 050207 economics uncertainty Business management General Economics Econometrics and Finance Developed country Finance |
| Zdroj: | Journal of Central Banking Theory and Practice, Vol 9, Iss s1, Pp 237-265 (2020) |
| ISSN: | 2336-9205 |
| Popis: | There is a growing body of literature examining the effectiveness of the monetary policy on the macroeconomy in different contexts for developed and developing countries. However, lately, especially after the GFC, the focus of research shifted to examine the role of uncertainty in economic activity and on the monetary policy effectiveness. Both theoretical and empirical studies suggest that uncertainty does influence monetary policy effectiveness. However, until now, empirical studies are restricted to only developed countries. To this end, the present study examines the influence of uncertainty on monetary policy effectiveness for a developing country, namely India. We applied a non-linear VAR, which allows us to examine the effect of monetary policy shocks during high and low uncertainty periods. The results exhibit that uncertainty influences the effectiveness of monetary policy shocks. We find weaker effects of the monetary policy shocks during high uncertainty regime relative to low uncertainty regime. |
| Databáze: | OpenAIRE |
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