Minsky, Monetary Policy and Mint Street: Challenges for the Art of Monetary Policymaking in Emerging Economies

Levy Economics Institute, Working Paper No. 820

44 Pages Posted: 3 Dec 2014

Date Written: December 1, 2014

Abstract

This paper examines the emerging challenges to the art of monetary policymaking using the case study of the Reserve Bank of India (RBI) in light of developments in the Indian economy during the last decade (2003-04 to 2013-14). The paper uses Hyman P. Minsky’s financial instability hypothesis as the conceptual framework for evaluating the endogenous nature of financial instability and its potential impact on monetary policymaking, and addresses the need to pursue regulatory policy as a tool that is complementary to monetary policy in light of the agenda of reforms put forward by Minsky. It further reviews the extensions to the Minskyan hypothesis in the areas of setting fiscal policy, managing cross-border capital flows, and developing financial institutional infrastructure. The lessons learned from the interplay of policy choices in these areas and their impact on monetary policymaking at the RBI are presented.

Keywords: Financial Crisis; Central Bank, Monetary Policy, Bank Regulation, Fiscal Policy, Exchange Rate Policy, Financial Institution Infrastructure

JEL Classification: E58, G01, G28

Suggested Citation

Srinivas, Yanamandra, Minsky, Monetary Policy and Mint Street: Challenges for the Art of Monetary Policymaking in Emerging Economies (December 1, 2014). Levy Economics Institute, Working Paper No. 820, Available at SSRN: https://ssrn.com/abstract=2532526 or http://dx.doi.org/10.2139/ssrn.2532526

Yanamandra Srinivas (Contact Author)

ICICI Bank ( email )

ICICI Bank Towers, Bandra Kurla Complex
Bandra (E),
Mumbai, Maharashtra 400051
India
022 26537637 (Phone)

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