An Evaluation of Monetary Policy in India: A SVAR Approach

Abstract

This paper sets an examination for the strength of the monetary policy transmission variables in India for the period 2000 to 2019 on the monthly basis. The variables incorporated in the model are Gross Domestic Product, Bank Rate, Wholesale Price Index and Exchange rate. The techniques of Structural Vector Autoregressive Model (SVAR) have been applied to perceive the clear picture of the contemporaneous relationship among the variables, thus providing with the relative importance and strength of each variable within the model. In the first place, all the variables were instituted to be statistically significant. At the same time, WPI and GDP are found to be more prominent, while exchange rate demanding a pivotal change in the working of the banking sector.