An Analysis of the Effectiveness of Monetary Policy Changes

Abstract

One of the key roles of the Reserve Bank of India or any central bank is to ensure economic stability in the country. For the purpose, the central bank adopts various measures to ensure that the inflation rates, interest rates, exchange rates and money supply remains under control. It uses tools like Cash Reserve Ratio and Repo rates to control liquidity and inflation in the country. The effectiveness of such policy rates in ensuring economic stability needs to be verified and tested. The decision maker needs to understand the effect of these changes on the affected variable. This given research is such an attempt to test and verify the effectiveness of the changes in monetary and policy rates on the desired critical factors. The research is aimed to provide inputs to decision makers in formulating monetary and economic policies and contributes to the limited existing literature on the subject.

Keywords: banking, monetary policies

JEL Classification: A10, E4, G21