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RBI study suggests mix of fiscal, monetary policies to mitigate economic downturn


The empirical findings of the study broadly confirm higher threshold inflation and higher growth in emerging market economies than in advanced economies. (Representative image)
MUMBAI: A Reserve Bank of India (RBI) study has advocated a mix of fiscal and monetary policies to mitigate economic downturn, saying demand side channel needs to be complemented with a conducive monetary transmission mechanism from the supply side.
Referring to the 2009 crisis, the study by Development Research Group (DRG) on Risk Premium Shocks and Business Cycle Outcomes in India , said that at the micro-level, the interest rate spread, attributed to risk premium on loans, increased in response to a rise in loan defaults during the post-2009 period. ....

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Mix of fiscal, monetary policies to mitigate economic downturn: RBI study


A Reserve Bank of India (RBI) study has advocated a mix of fiscal and monetary policies to mitigate economic downturn, saying demand side channel needs to be complemented with a conducive monetary transmission mechanism from the supply side.
Referring to the 2009 crisis, the study by Development Research Group (DRG) on Risk Premium Shocks and Business Cycle Outcomes in India , said that at the micro-level, the interest rate spread, attributed to risk premium on loans, increased in response to a rise in loan defaults during the post-2009 period.
Also, the credit growth was found to be negatively associated with the loan default rate, indicating that a shock to the borrowing sectors has a significant negative impact on credit growth, it added. ....

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Lower inflation target to hurt growth, but will bring financial stability: RBI study


Lower inflation target to hurt growth, but will bring financial stability: RBI study
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IANS
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Reserve Bank of India (RBI). (File Photo: IANS). Image Source: IANS News
Mumbai, May 24 : A Reserve Bank of India (RBI) study has suggested a decision to have a lower inflation target would jeopardise the long-term growth but help in bringing in financial stability.
The policy makers may choose to set the inflation target below the threshold level, but only by consciously sacrificing long-term real growth of GDP and hence the adverse impact on the rate of poverty alleviation, said the study titled Threshold Level of Inflation - Concept and Measurement ....

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