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May 28, 2021

US monetary policy and the financial channel of the exchange rate: evidence from India

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Originally published on by Bank of International Settlements . Link to original report

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The effect of US monetary policy on EMEs is one of the fiercely debated issues in international finance. We contribute to this debate using micro- and macro-level analyses from India over the period 2004-2019. Using a dynamic panel estimation model of non-financial firms, we show that US monetary tightening adversely affects firms’ net worth and reduces domestic credit relative to external credit…

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