Artha Vijnana: Journal of The Gokhale Institute of Politics and Economics

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Estimating Backward Looking IS Curve for India


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1 Mumbai School of Economics and Public Policy (Autonomous), University of Mumbai, Mumbai 400098, India
     

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The present study estimates the backward looking IS curve for India using monthly data over the period 1998 to 2016. The sample period is divided into two sub-samples, i.e., pre and post May 2011. The empirical results show that the link between the real interest rate and output gap, the important link in the monetary policy transmission process, is present in both the sample periods. It implies that the monetary policy does have an impact on the aggregate demand. From among the additional variables in the IS equation, only external demand and crude oil prices have significant and expected impact on the output gap.
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  • Estimating Backward Looking IS Curve for India

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Authors

Bhavesh Salunkhe
Mumbai School of Economics and Public Policy (Autonomous), University of Mumbai, Mumbai 400098, India
Anuradha Patnaik
Mumbai School of Economics and Public Policy (Autonomous), University of Mumbai, Mumbai 400098, India

Abstract


The present study estimates the backward looking IS curve for India using monthly data over the period 1998 to 2016. The sample period is divided into two sub-samples, i.e., pre and post May 2011. The empirical results show that the link between the real interest rate and output gap, the important link in the monetary policy transmission process, is present in both the sample periods. It implies that the monetary policy does have an impact on the aggregate demand. From among the additional variables in the IS equation, only external demand and crude oil prices have significant and expected impact on the output gap.

References





DOI: https://doi.org/10.21648/arthavij%2F2018%2Fv60%2Fi3%2F176174