Welcome!
About the objectives of this blog
How the Federal Reserve implements monetary policy
The lecture slides explaining the Fed functioning in ample-reserves framework after the GFC
Discovering India Potential Growth
This reasearch note analyzes the potential drivers of India’s potential growth for next decade, using the Long Term Growth Model built by the World Bank, namely investment, labour and TFP growth.
How does the RBI respond to elevated inflation in a Fed hiking cycle?
We estimate the RBI’s reaction function using output gap, inflation gap, US policy rate, external vulnerability, and the ‘real rate stance’ of the RBI governor (or MPCs). Our model is able to explain over 80% of the variation in policy repo rates.
Higher for longer: India’s inflation outlook post supply shock
India’s core CPI inflation has increased to 6% yoy despite a negative output gap, driven by core goods inflation increasing to 7% yoy. Given higher food prices and elevated commodities prices, we estimate headline CPI inflation to average 6.6% yoyin 2022, above the 2%-6% RBI target band.
What drives India’s exports?
We estimate that India’s export growth is more elastic to changes in the trading partners country growth compared to changes in the real effective exchange rate (REER). We also find that domestic demand drives the imports growth.