Policy Transmission in Indian Money Markets Role of Announcement Effect and Liquidity Effect.

This paper looks into the role of announcement effect and liquidity effect in monetary transmission in Indian money market. It first looks into the impact of these two effects on the operational target that is, overnight call money market and then applies the same framework on other short term money market rates. The time period considered is from May 2011, when the new monetary policy framework was introduced till Feb 2021. The results show the presence of both the effects on the overnight call money rate and also on other short term rates. In addition to this, there is a presence of asymmetry in monetary transmission which is more prominent after fine-tuning of RBI's monetary operations. [ABSTRACT FROM AUTHOR]