• Fiscal-Monetary Interaction and Sovereign Bond Yields: Evidence from Speeches of Central Banks and Finance Ministries

with Srinivasan Murali, Abhinav Anand and Jalaj Pathak

Abstract: The effect of fiscal-monetary interaction on macro variables has generated considerable interest for a long time. We present an empirical measure of fiscal and monetary interaction across six developed economies. Analysing the speeches of the central bank and finance ministry authorities, we construct a time-varying estimate of linkages between fiscal and monetary authorities across the different countries. Using topic analysis, the paper identifies the heterogeneous measurement of the interaction of different types of speeches. Incorporating our measure of fiscal-monetary interaction into a panel VAR setup, we find that increased interaction between fiscal and monetary authorities is interpreted as a signal towards price stability. Increased fiscal-monetary interaction in contrasting periods of inflation or business cycles results in a similar rise in sovereign bond yields. In contrast, an equal increase in interaction leads to a decline in interest rates in a counterfactual environment with restricted interaction between fiscal and monetary authorities.

• Monetary & Fiscal Policy and Consumption Inequality

with Chetan Subramanian and Srinivasan Murali

Abstract: Studies on the impact of monetary policy on inequality are contradictory, focusing on empirical research and limited theoretical models. We assess the interplay of monetary and fiscal policies on consumption inequality in a medium-scale DSGE new Keynesian framework with heterogeneous households facing financial frictions. Financial frictions in financial intermediaries influence consumption decisions through credit spread that impacts output, wage, interest rate, and firm markups. Deploying and calibrating an augmented TANK setup that closely approximates the outcomes of a HANK model to India and analysing the effect of expansionary monetary, fiscal and productivity shocks on the relative redistribution of consumption within unconstrained and constrained households, we find that consumption inequality reduces with all three expansionary shocks. Households' wage, profit, tax and interest rate channels determine the mechanism of aggregate and distributional response to shocks. While the responses of wage and profit channels may net out each other, the response of interest rate and tax channels dominates the overall consumption responses of both households.

• Does emotional empathy from teachers work better than tracking in improving students’ comprehensive outcomes?

with Soham Sahoo

• Emancipation from Gender-based Discrimination in Workplaces through Identity mechanics - Experimental evidence from USA 

with Vivek Kandimalla and Sabhya Rai

• Is legally backed Minimum Support Price in Indian Agriculture tenable?

• Misallocation of Bank Credit - Indian MSME Perspective