{"id":30231,"date":"2018-10-26T14:53:11","date_gmt":"2018-10-26T09:23:11","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=30231"},"modified":"2018-10-26T14:53:11","modified_gmt":"2018-10-26T09:23:11","slug":"monetary-policy-not-apt-to-ensure-financial-stability","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/monetary-policy-not-apt-to-ensure-financial-stability\/","title":{"rendered":"\u2018Monetary policy not apt to ensure financial stability\u2019"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/todays-paper\/tp-business\/monetary-policy-not-apt-to-ensure-financial-stability\/article23396175.ece\"><strong>\u2018Monetary policy not apt to ensure financial stability\u2019<\/strong><\/a><\/p>\n<p><strong>What has happened?<\/strong><\/p>\n<p>Monetary policy transmission improves if friction in the financial system diminishes, according to the findings of a study by the Development Research Group (DRG) of the Reserve Bank of India (RBI).<\/p>\n<p><strong>DRG<\/strong><\/p>\n<p>The DRG is constituted by the apex bank in its Department of Economic and Policy Research to carry out quick policy-oriented research on subjects of current interest.<\/p>\n<p><strong>Study model<\/strong><\/p>\n<p>The DRG study \u2014 \u2018Role of financial frictions in monetary policy transmission in India\u2019 \u2014 developed a New Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE) model with an imperfectly competitive banking sector and examined the role of various financial frictions in monetary policy transmission (MPT) in India.<\/p>\n<p><strong>Financial market frictions<\/strong><\/p>\n<p>The credit channel-based explanation of MPT attributes weak transmission of monetary policy in emerging market and developing economies to the predominance of financial market frictions.<\/p>\n<p><strong>Findings of the study<\/strong><\/p>\n<p>The study findings show MPT improved as friction in the financial system diminished.<\/p>\n<p>Adjusting the policy interest rate to smooth out the credit cycle exacerbates volatility of inflation and output<\/p>\n<p><strong>Inflation stabilization, a desirable policy<\/strong><\/p>\n<p>It suggested that inflation stabilization was the most desirable policy option for the RBI as it minimized the welfare loss irrespective of policy rules<\/p>\n<p><strong>Conclusion<\/strong><\/p>\n<p>Overall, it appears that targeting financial stability through monetary policy rule may not be appropriate for the purpose of economic stabilization.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u2018Monetary policy not apt to ensure financial stability\u2019 What has happened? Monetary policy transmission improves if friction in the financial system diminishes, according to the findings of a study by the Development Research Group (DRG) of the Reserve Bank of India (RBI). DRG The DRG is constituted by the apex bank in its Department of&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/monetary-policy-not-apt-to-ensure-financial-stability\/\">Continue reading <span class=\"screen-reader-text\">\u2018Monetary policy not apt to ensure financial stability\u2019<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-30231","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704913949},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/30231","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=30231"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/30231\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=30231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=30231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=30231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}