Policy errors and business cycle fluctuations: Evidence from an emerging economy
نویسندگان
چکیده
In the immediate aftermath of global financial crisis, monetary policy in India became accommodative as other major economies, but subsequently turned highly contractionary despite falling inflation, which we characterize errors. Government expenditure also had similar pattern. This paper therefore estimates a medium scale New Keynesian model (with earnings and assets based collateral constraint) to explore impact such errors on Indian business cycles, capturing prevailing narrative both fiscal policies along with actual inflation scenario. Our smoothed mark-up, productivity, interest rate government shocks mimic transition economy, moving together pattern post crisis period. We find that was during 2013-2016 led significantly lower output. rationalize if supply side (adverse productivity or mark-up) dominate, tend occur, suggesting makers need pay attention sources developing economy while setting demand-management policies. Given current pandemic more adverse shock, are likely occur responds this type inflationary shocks.
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ژورنال
عنوان ژورنال: Journal of Economic Behavior and Organization
سال: 2021
ISSN: ['0167-2681', '1879-1751']
DOI: https://doi.org/10.1016/j.jebo.2021.10.004