RBI faces dilemma from US policy spillovers – BIS paper


Monetary policy-makers in India face a dilemma in responding to the impact of spillovers from US monetary policy, a working paper published by the Bank for International Settlements finds.

Shesadri Banerjee and Madhusudan Mohanty study micro-level data on the “financial channel” of the exchange rate. Non-financial firms in India increasingly borrow in US dollars. This can mean that a depreciation of the rupee, triggered by a tightening of policy in the US, is contractionary for India.


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