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Though an accumulating body of study has analysed monetary policy transmission in India, there are few studies examining the differential impact of monetary policy action. Against this backdrop, this study aims to analyse the differential impact of monetary policy on aggregate demand, aggregate supply and their components along with the general price level in India.

The study develops a structural macroeconometric model, which is primarily aggregate and eclectic in nature. The generalized method of movements is used for estimation of behavioural equations, while a Gauss–Seidel algorithm is used for model simulation purposes.

The paper presents the results of two policy simulations from the estimated model that highlight the differential impact of monetary policy. The first one, hike in the policy rate by 5% and second is a reduction in bank credit to the commercial sector by 10%. The results from the first policy simulation experiment reveal that interest hike has a significant negative impact on aggregate demand, aggregate supply and general price level. However, the maximum impact is borne by investment demand and imports followed by private consumption. While as among the components of aggregate supply maximum impact is born by infrastructure output followed by the manufacturing and services sector with the agriculture sector found to be insensitive in nature. The results from the second policy simulation experiment revealed that pure monetary shocks have a significant negative impact on aggregate demand, aggregate supply and general price level. However, the maximum impact is born by private consumption and imports followed by investment demand. While as among components of aggregate supply maximum impact is borne by infrastructure followed by the manufacturing and services sector with the agriculture sector found to be insensitive in nature. From both policy simulation experiments, the study highlighted the relative importance of the income absorption approach as opposed to the expenditure switching effect.

The results obtained in this study provides a strong framework for design the monetary policy framework. The results are in a view of the differential impact of monetary policy action among the components of both aggregate demand and aggregate supply. This reflection of differential impact has immense significance for the macroeconomic stabilization as the central bank will have to weigh the varying repercussion of its actions on different sectors. For instance, the decline in output after monetary tightening might be conceived as mild from an overall perspective, but it can be appreciable for some sectors. This differential influence will have an implication for policy design to care for distributional aspects, which otherwise could be neglected/disregarded. Similarly, the output decline may be as a result of either consumption postponement or a temporary slowdown in investment. However, the one emanating due to investment decline will have lasting growth implications compared to a decline in consumer demand. In addition, the relative strength of expenditure changing or expenditure switching policies of trade balance stabilization may have varying consequences in the aftermath of monetary policy shock. Accordingly information on the relative sensitiveness/insensitiveness of different sectors/ components of aggregate demand towards monetary policy actions furnish valuable insights to monetary authorities in framing appropriate policy.

The work carried out in the present paper is motivated by the fact that although a number of studies have examined the monetary transmission mechanism in India, a very few studies examining the differential impact of monetary policy action. However, to the best of the knowledge, there is no such studies, which have examined the differential impact of monetary policy in the structural macro-econometric framework. The paper will enrich the existing literature by providing a detailed account of the differential impact of monetary policy among the components of both aggregate demand and aggregate supply in response to an interest rate hike, as well as a decrease in the money supply.

The purpose of this paper is to evaluate and analyze impacts of the monetary policy (MP) – money aggregate and interest rate – on the exchange rate in Vietnam.

The study uses data over the period of 2008–2018 and applies the vector autoregression model, namely recursive restriction and sign restriction approaches.

The main empirical findings are as follows: a contraction of the money aggregate significantly leads to the real effective exchange rate (REER) depreciating and then appreciating; a tightening of the interest rate immediately causes the REER appreciating and then depreciating; and both the money aggregate and the interest rate strongly determine fluctuations of the REER.

The quantitative results imply that the MP affects the REER considerably.

Having defined liquidity, the aim is to assess the predictive capacity of its representative variables, so that economic fluctuations may be better understood.

Conceptual variables that are representative of liquidity will be used to formulate the predictions. The results of various machine learning models will be compared, leading to some reflections on the predictive value of the liquidity variables, with a view to defining their selection.

The predictive capacity of the model was also found to vary depending on the source of the liquidity, in so far as the data on liquidity within the private sector contributed more than the data on public sector liquidity to the prediction of economic fluctuations. International liquidity was seen as a more diffuse concept, and the standardization of its definition could be the focus of future studies. A benchmarking process was also performed when applying the state-of-the-art machine learning models.

Better understanding of these variables might help us toward a deeper understanding of the operation of financial markets. Liquidity, one of the key financial market variables, is neither well-defined nor standardized in the existing literature, which calls for further study. Hence, the novelty of an applied study employing modern data science techniques can provide a fresh perspective on financial markets.

因此,就了解經濟週期和經濟發展而言,流動資金是一個極其重要的概念。本研究擬在安全資產的價格預測方面取得進步。安全資產代表了經濟的實際情況,特別是美國的十年期國債。

流動資金的定義上面已說明了; 為進一步了解經濟波動,本研究擬對流動資金代表性變量的預測能力進行評估。

研究使用作為流動資金代表的概念變項去規劃預測。各機器學習模型的結果會作比較,這會帶來對流動資金變量的預測值的深思,而深思的目的是確定其選擇。

只要在私營部門內流動資金的數據比公營部門的流動資金數據、在預測經濟波動方面貢獻更大時,我們發現、模型的預測能力也會依賴流動資金的來源而存在差異。國際流動資金被視為一個晦澀的概念,而它的定義的標準化,或許應是未來學術研究的焦點。當應用最先進的機器學習模型時,標桿分析法的步驟也施行了。

若我們對有關的變量加深認識,我們就可更深入地理解金融市場的運作。流動資金,雖是金融市場中一個極其重要的變量,但在現存的學術文獻裏,不但沒有明確的定義,而且也沒有被標準化; 就此而言,未來的研究或許可在這方面作進一步的探討。因此,本研究為富有新穎思維的應用研究,研究使用了現代數據科學技術,這可為探討金融市場提供一個全新的視角。

An aggregate production function has been used in macroeconomic analysis for a long time, even though it seems that it is conceptually confusing and problematic. The purpose of this paper is to argue that the measurement problem related to the heterogenous capital input that exists in macroeconomics is also relevant to microeconomic market situations.

The author constructed a microeconomic market model to address both the problems of the measurement of the physical capital and of substitutability between labor and capital in the short run using two types of technologies: labor neutral and labor reducing. The author proposed that labor and physical capital inputs are complementary in the short run and can become substitutes only in the long run when the technology advances.

The author found that even if the technology improves at a fast rate over time, there are then diminishing returns of profits to technology and an upper limit to profits. Moreover, the author showed that under the labor-reducing technology, labor class earns more initially as technology improves, but their incomes start declining after some threshold level of passage of time.

The author cautioned the applied researcher that the estimated labor and capital coefficients of generalized Cobb–Douglas and constant elasticity of substitution of types of production functions could not be interpreted as partial elasticities of labor and capital if in reality the data come from fixed-proportions types of processes.

This paper aims to examine the distributional channel of monetary policy (MP) and evaluate how financial development (FD) affects the transmission mechanism from MP to income inequality.

The empirical investigation is implemented for 32 sub-Saharan African countries over the period 2000–2017, with the aid of vector autoregressions and a dynamic panel data model.

This study shows that MP has a significant impact on income inequality and the financial system plays an important role by dampening the dis-equalising effects of MP shocks. Both MP and FD directly exert redistributive effects. However, the financial system appears to wield the greatest impact and contribute more to the inequality dynamics.

The policy-relevant conclusion is that the financial system is crucial for the monetary transmission mechanism and the effects of MP actions. As the economy develops financially, it may require less movement in the policy position to achieve the desired policy outcome. Also, macroeconomic stabilisation policies may not be distributionally neutral and may have a role to play in averting longer-term increases in inequality.

Contrary to previous studies, this study indicates MP by the structural shocks to purge the MP stance of the issues of endogenous and anticipatory actions. A distinctive finding of this paper is that cross-country differences in monetary regimes and income explain a significant variation in the distributional impacts of monetary policy. Notwithstanding, the evidence shows that the strength of the transmission is more dependent on FD than the nature of the policy regime.

The market-based monetary policy framework has been favoured by Economic Community of West African States (ECOWAS) economies. Hence, this study aims to investigate the effect of monetary policy channels on the sectoral value added and sustainable economic growth in ECOWAS. Data from the World Bank and International Monetary Fund over 2013–2019 were sourced for thirteen member countries. ECOWAS is found to have very high inflation level, interest and exchange rates.

The study adopted the Driscoll–Kraay fixed-effects ordinary least squares regression (OLS) estimator.

The findings revealed that while the effect of monetary policy channels on the agricultural sector value added is largely heterogenous and significantly in-elastic, the one on the industrial and services sectors are overwhelmingly homogeneous and negative, but insignificant for the services sector. Moreover, the effect of monetary policy channels on sustainable economic growth is also homogeneously asymmetric, with imminent stagflation, while the interactive effects of monetary policy channels are heterogeneous on sustainable economic growth and economic sectors. Therefore, an inflation targeting monetary policy stance is generally recommended with prioritised exchange rate stabilisation amid sufficient fiscal space.

This is amongst the first studies to investigate monetary policy channels, sectoral outputs and sustainable growth in the ECOWAS region with a rigorous analysis and found implications for policy.

This study empirically aims to analyze the transmission of monetary policy in consideration of asymmetry based on the Bank of the Lao PDR (BOL)'s monetary policy tools and real and financial variables in the domestic market.

This study adopts two approaches, conventional vector autoregression (VAR) and asymmetric VAR, to investigate the impact of monetary policy on macroeconomic variables including inflation and real GDP growth in the Lao PDR.

Under a highly dollarized monetary regime, the policy rate change plays a weaker role compared with M0, which exerts significantly positive effects on real GDP growth and inflation. The results of the asymmetric VAR model further substantiate that the real economy responds to a positive M0 shock (easing monetary policy) rather than a negative shock (tightening monetary policy).

Overall estimation results suggest that the effectiveness of monetary policy is limited in Laos, which would take priority over efforts to strengthen the development of the short-term financial market and de-dollarization.

This study can fill the gap in the literature in which the discussions on the transmission mechanism of monetary policy in the BOL's monetary policy are still little known.

Among the many factors fueling the inflationary tendencies in an economy such as monetary shocks, structural shocks, demand shocks, external shocks and demographic changes, the issue of inflation (INF) has also been found to be related to fiscal policy decisions of the government. The purpose of this study is to investigate the inflationary tendencies in India particularly from the fiscal point of view. The study also examines the influence of other potential determinants such as output growth rate, interest rate, trade-openness (TO) and oil price inflation (OPI).

To examine the dynamic nature of association between fiscal deficit and inflation, the study applies the Toda-Yamamoto (1995) test and Breitung and Candelon (2006) test to investigate the nature of causality in time and frequency domain frameworks. In addition, to scrutinize the possibility of a long-run association, that too from an asymmetric point of view, the study applies a Non-linear Autoregressive Distributed lag model (NARDL) given by Shin et al. (2014). Finally, non-linear cumulative dynamic multipliers are used to trace the traverse between disequilibrium position of short-run and subsequent long-run equilibrium of the system.

The authors found a unidirectional causality from fiscal deficit to inflation in case of time domain analysis and no feedback causality is reported. However, in case of frequency domain design, causality from fiscal deficit to inflation is found at low frequencies only, i.e. no short-run causality is established and hence dynamic nature of the relationship between the two variables is vindicated. Using NARDL model, the results document the existence of an asymmetric long-run direct association between fiscal deficit and inflation. However, an increase in deficit is found to be more inflationary and a decrease affects the inflation with a lower magnitude. The asymmetric impact of fiscal deficit on inflation can be explained through the existence of liquidity constraints, consumption-investment downward inflexibility and the downward price stickiness. Contractionary monetary policy action is found to be more effective than an expansionary one, signifying the asymmetric influence of monetary policy actions on the inflation of India. Similarly, in a supply-constrained economy with downward price rigidity, the authors found an asymmetric impact of output growth and output decline on inflation. As regard to the trade-openness, although an asymmetry is reported, the signs refute the validation of Romer (1993) hypothesis. Finally, the impact of oil price inflation on the inflationary pressures is according to theory but the coefficients are devoid of statistical significance.

These results indicate some important policy recommendations. Fiscal consolidation strategy should be executed in an appreciable manner to achieve the sound fiscal health and lower INF. The disciplined fiscal strategy would also be imperative for an effective monetary policy. Monetary authorities should possess noticeable credibility to manage the macroeconomic system and policy stances should be implemented according to requirements of the economy. Growth in output should be encouraged to have two-fold benefits to the economy – reducing INF on the one hand and fiscal deficits on the other.

The study contributes to the existing literature in the following ways. First, taking note of dynamic nature of the relationship between these two variables, the study examined the deficit INF nexus in a dynamic and asymmetric framework. The novelty of the study is ensured by the very nature of it is the first study in case of India to identify the fiscal INF in an asymmetric configuration. The authors applied a NARDL model, given by Shin et al. (2014) to examine the existence of any cointegrating relationship in an asymmetric paradigm. Second, the nature of causality between fiscal deficit and INF has been examined in a time domain and FD framework to portray precisely the casual interactions between these two variables in the short-run and long run. The study will, therefore, enrich the existing literature along the asymmetric lines.

This paper aims to uncover the nexus between budget deficits, money growth and inflation in Vietnam in the period 1995–2012.

The paper uses a structural vector auto-regressive model of five endogenous variables including inflation, real GDP growth, budget deficit growth, money growth and the interest rate.

It is found that inflation rose in response to positive shocks to money growth and that budget deficits had no significant impact on money growth and therefore inflation. This empirical evidence supports the hypothesis that fiscal and monetary policies were relatively independent. Money growth significantly decreased in response to a positive shock to inflation; interest rates had no significant effect on inflation but considerably increased in response to positive inflation shocks. This implies that the monetary base was more effective than interest rates in fighting inflation.

This paper sheds light into understanding the link between budget deficits, money growth and inflation in Vietnam during the high-inflation period 1995–2012. The finding supports the hypothesis that fiscal and monetary policies were relatively independent over the period.

Using an innovative threshold estimation technique, this paper provides new evidence on the relationship between finance and inflation with distinct levels of finance.

The sample consisted of 10 high inflation countries using time series data for the period of 1992–2020. These 10 countries recorded the world's highest inflation rates in 2017.

The findings demonstrate that there is a threshold effect on the finance–inflation relationship. Whilst the effects of finance are consistently positive for below and above the threshold models, financial depth above the threshold tends to aggravate the inflation level.

These results disclose that financial depth could be the cause of high inflation in the top 10 countries and thus, is not necessarily welcome as too rapid of a price increase may in turn reverse the prospect of economic growth. Searching and strategizing for the optimal level of financing is crucial in facilitating price stability and economic growth.

The authors believe that the effect of financial depth on inflation is characterised by being desirable to certain extent and undesirable if over-financing is beyond the optimum level. Therefore, in this study, the authors have introduced the threshold modelling as the potential strategy to connect financial depth and inflation.