Abstract:-

Using measures of monetary policy surprises identified from the Overnight Indexed Swap market in India, this paper documents heterogeneity in the effects of monetary policy surprises on scheduled and unscheduled announcement dates. Higher interest rates on scheduled announcement dates lower stock prices, reduce forecasted and actual output as well as inflation. In contrast, unscheduled monetary policy surprises are predictable by past macroeconomic conditions, raise stock prices, output and inflation on impact. These results are consistent with less precise identification of exogenous changes in monetary policy on unscheduled announcement dates compared to scheduled announcement dates. Monetary policy transmission in India, identified using monetary policy surprises from scheduled announcement dates, is found to be significantly stronger than previously documented.