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Author

Muneesh Kapur

Other affiliations: International Monetary Fund
Bio: Muneesh Kapur is an academic researcher from Reserve Bank of India. The author has contributed to research in topics: Monetary policy & Inflation targeting. The author has an hindex of 13, co-authored 39 publications receiving 499 citations. Previous affiliations of Muneesh Kapur include International Monetary Fund.

Papers
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Journal ArticleDOI
TL;DR: A New Keynesian model estimated for India yields valuable insights as mentioned in this paper, showing that aggregate demand reacts to interest rate changes with a lag of three quarters, while inflation takes four quarters to respond to demand conditions.
Abstract: A New Keynesian model estimated for India yields valuable insights. Aggregate demand reacts to interest rate changes with a lag of three quarters, while inflation takes four quarters to respond to demand conditions. Inflation thus responds to monetary policy actions with a lag of seven quarters. Inflation is inertial and persistent when it sets in, irrespective of the source. Exchange rate pass-through to domestic inflation is low. Inflation turns out to be the dominant focus of monetary policy, accompanied by a strong commitment to the stabilization of output.

61 citations

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TL;DR: In this paper, the authors examined monetary transmission mechanism for India in the context of a small macro model using quarterly data, given the volatility emanating from the agricultural sector, the authors models both overall growth and overall inflation as well as non-agricultural growth and non-food manufactured products inflation.
Abstract: This paper examines monetary transmission mechanism for India in the context of a small macro model using quarterly data. Given the volatility emanating from the agricultural sector, the paper models both overall growth and overall inflation as well as non-agricultural growth and non-food manufactured products inflation, i.e., components stripped of the influence from the agricultural sector and which are more amenable to monetary actions. Model simulations for a one-quarter 100 bps increase in the nominal effective policy rate show that the peak effect on non-agricultural growth is almost 40 bps with a lag of 2 quarters and that on non-food manufactured products inflation is 25 bps with a lag of 5 quarters. Therefore, the interest rate channel is effective in the Indian context and the magnitude of the impact on growth and inflation is comparable to that in major advanced and emerging economies; however, the evidence for both India and other countries suggest that the impact of monetary policy actions on inflation is modest and subject to lags. The results are sensitive to alternative measures of real interest rate. Despite the monetary tightening by Reserve Bank of India during 2010 and 2011, inflation remained high and this could be attributed to the structural component of food inflation as well as the surge in international commodity prices beginning the second half of 2010 and continuing into the first half of 2011.

57 citations

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TL;DR: The authors assesses external sector and monetary management policies and finds the outcome can be attributed to judicious use of a menu of options such as management of the capital account; restrictions on access of financial intermediaries to external borrowings vis-a-vis non-financial corporate entities; flexibility in exchange rate movements with capacity to intervene in times of excessive volatility; building up of reserves; strengthening of the financial sector; pre-emptive tightening of norms in sectors with high credit growth; and refinements in the institutional framework for monetary policy.
Abstract: Large capital inflows are often followed by credit and investment booms, inflation, real exchange rate misalignments, current account imbalances and financial sector weaknesses culminating in financial crisis and long-term output losses. While India has received large capital flows since 1993-94, macroeconomic price and financial stability has been maintained in a high growth environment. What explains this desirable outcome? This paper assesses external sector and monetary management policies and finds the outcome can be attributed to judicious use of a menu of options such as management of the capital account; restrictions on access of financial intermediaries to external borrowings vis-a-vis non-financial corporate entities; flexibility in exchange rate movements with capacity to intervene in times of excessive volatility; building up of reserves; strengthening of the financial sector; pre-emptive tightening of norms in sectors with high credit growth; and refinements in the institutional framework for monetary policy. As a result of this approach, growth in monetary/credit aggregates was contained amid growth in the real economy, structural transformation and financial deepening. Inflation was contained even as growth accelerated; financial stability was maintained even as the global economic environment experienced a series of financial crises. The impossible trinity was achieved by maintaining an open but managed capital account and a flexible exchange rate with management of volatility. Rather than relying on a single instrument, many instruments were used in coordination since the Reserve Bank’s jurisdiction over both monetary policy and the regulation of financial institutions permitted the use of various policy instruments. Key lessons from the Indian experience are that monetary policy needs to move away from price stability/inflation targeting objective, central banks need multiple instruments and capital account management has to be countercyclical.

45 citations

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TL;DR: In this article, the authors focus on modeling and forecasting inflation in India using an augmented Phillips curve framework and find that demand conditions have a stronger impact on non-food manufactured products (NFMP) inflation vis-a-vis headline wholesale price inflation and that NFMP inflation is more persistent than headline inflation.

32 citations

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TL;DR: In this paper, the authors argue that full capital account liberalization can impart avoidable volatility and have an adverse impact on growth prospects of emerging market economies (EMEs), and that greater caution is needed in the liberalization of debt flows.
Abstract: Capital flows to emerging market economies (EMEs) have been characterized by high volatility since the 1980s. In recent years (especially since 2003), although gross as well as net capital flows to the EMEs have increased, they could not be absorbed domestically. Overall, savings have flowed uphill from EMEs to advanced economies, challenging the conventional view that capital flows to EMEs are always beneficial through augmentation of their resources leading to greater investment. Full capital account liberalization can impart avoidable volatility and have an adverse impact on growth prospects of EMEs. Available evidence is strongly in favor of a calibrated and well-sequenced approach to opening up the capital account and its active management, along with complementary reforms in other sectors. Greater caution is needed in the liberalization of debt flows.Despite much advice to the contrary, most EMEs manage their capital accounts actively to cushion their economies from undue volatility, including interventions in the foreign exchange markets accompanied by sterilization. Sound macroeconomic and financial policies - accompanied by prudent capital account management, greater exchange rate flexibility, purposive use of prudential regulation, and continued financial market development practiced by most Asian EMEs over the past decade - have cushioned their economies from the current global financial crisis that started in 2007. They have successfully achieved a virtuous circle of continuing growth, low and stable inflation, and financial stability. How these elements can be best combined will depend on the country and on the period: There is no “one size fits all.”Such a discretionary approach does put a great premium on the skill of policymakers and can run the risk of markets perceiving central bank actions becoming uncomfortably unpredictable. Such risk is mitigated by a record of successful management.

28 citations


Cited by
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01 Jan 2009
TL;DR: In this paper, the authors make a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected and make their origins in economic policies followed in a number of countries in the 1990s and in distortions that influenced the transmission of these policies through U.S. and ultimately through global financial markets.
Abstract: This paper makes a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected. Both have their origins in economic policies followed in a number of countries in the 2000s and in distortions that influenced the transmission of these policies through U.S. and ultimately through global financial markets. In the U.S., the interaction among the Fed’s monetary stance, global real interest rates, credit market distortions, and financial innovation created the toxic mix of conditions making the U.S. the epicenter of the global financial crisis. Outside the U.S., exchange rate and other economic policies followed by emerging markets such as China contributed to the United States’ ability to borrow cheaply abroad and thereby finance its unsustainable housing bubble. *University of California, Berkeley, and Harvard University. Paper prepared for the Federal Reserve Bank of San Francisco Asia Economic Policy Conference, Santa Barbara, CA, October 18-20, 2009. Conference participants and especially discussant Ricardo Caballero offered helpful comments. We thank Alexandra Altman and Matteo Maggiori for outstanding research assistance. Financial support was provided by the Coleman Fung Risk Management Center at UC Berkeley and CEPREMAP.

515 citations

Journal ArticleDOI
TL;DR: In this article, the authors identify 26 episodes of public debt overhang, 20 of which lasted more than a decade, and the long duration of these episodes implies that the cumulative shortfall in output from such overhang is potentially massive, and these growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest.
Abstract: exceeds 90 percent of nominal GDP on a sustained basis. Such public debt overhang episodes are associated with lower growth than during other periods. Even more episodes are associated with lower growth than during other periods. Even more striking, among the 26 episodes we identify, 20 lasted more than a decade. The long striking, among the 26 episodes we identify, 20 lasted more than a decade. The long duration belies the view that the correlation is caused mainly by debt buildups during duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions. The long duration also implies that the cumulative shortfall business cycle recessions. The long duration also implies that the cumulative shortfall in output from debt overhang is potentially massive. These growth-reducing effects of in output from debt overhang is potentially massive. These growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest high public debt are apparently not transmitted exclusively through high real interest rates, in that in eleven of the episodes, interest rates are not materially higher. rates, in that in eleven of the episodes, interest rates are not materially higher.

469 citations

Journal ArticleDOI
TL;DR: The authors used a variety of empirical gravity models to estimate the currency union effect on trade and exports, using recent data which includes the European Economic and Monetary Union (EMU), and their preferred methodology indicates that EMU has boosted exports by around 50%.

143 citations

Journal ArticleDOI
TL;DR: In this paper, the balance of payments in the US criminal justice system is discussed, and the authors propose a solution to balance the payments of criminal justice workers in the United States.
Abstract: (1997). The Balance of Payments. Criminal Justice Matters: Vol. 30, Prisons Today, pp. 29-31.

143 citations