Photos from the Workshop 

The Tenth Delhi Macroeconomics Workshop 2025

Jointly organised by Indian Statistical Institute, Delhi Centre and Centre for Research in Macro-Economics and Macro-finance (CREMMF)

Date: October 23-24, 2025

Venue: Auditorium, Indian Statistical Institute - Delhi Centre 

List of Speakers: 

1. Rosen Chowdhury (Swansea University, UK)

Title: Geopolitical risk and the bank lending channel: Evidence from the Turkish economy.

Abstract: The bank lending channel (BLC) is a critical mechanism through which monetary policy shocks are transmitted in most economies. However, the literature remains limited on how the BLC moderates or amplifies these shocks during periods of varying geopolitical risk. Existing studies often suffer from methodological shortcomings, particularly simultaneity issues and inference errors stemming from structural breaks in the data-generating process. This paper posits that monetary policy shocks of equal magnitude can yield asymmetric effects via a state-dependent BLC, especially under conditions of high versus low geopolitical risk. We test this hypothesis using data from Turkey through a two-stage empirical strategy incorporating both aggregate and disaggregated bank balance sheet data. In the first stage, we employ a structural non-linear local projection model to capture state dependence. The results indicate that the impact of the BLC is significantly influenced by the prevailing geopolitical risk environment: a one standard deviation expansionary monetary policy shock yields notable effects only during low-risk periods. In the second stage, we utilize the Double-D GMM estimator to account for bank-specific heterogeneity. Findings reveal that less capitalized banks are more vulnerable to geopolitical shocks than their well-capitalized counterparts, underscoring the importance of capital adequacy in buffering external risks.

2. Bo Yang (Swansea University, UK)

Title: Fuel Subsidy Removal and Monetary Policy Adjustments in an Oil-Producing Emerging Economy.

Abstract: This paper examines the implications of fuel subsidy removal in an oil-producing economy, focusing on the central bank's response to volatile oil prices. Using a Markov-switching DSGE model, we analyze the welfare effects of this policy change under different regimes of oil price volatility and monetary policy. Our findings, based on data from Nigeria, reveal time-varying policy adjustments that synchronize with states of high oil price volatility. Subsidy removal has welfare-reducing and heterogeneous effects on households, especially when implemented in an environment of heightened volatility. The efficacy of monetary policy in mitigating the impacts of subsidy removal depends on the central bank's ability to design a flexible framework capable of adapting to economic shifts, while balancing its stabilization objectives. The observed policy switching responding to different states of oil price shocks suggests a need for the central banks of oil-producing emerging economies to consider the prospects of a dual-mandate regime.

3. Jordan Norris (New York University, Abu Dhabi)

Title: Supply Chain Networks and the Macroeconomic Expectations of Firms

Astract: Using a randomized control trial of approximately 1,000 firm pairs in New Zealand that have a customer-supplier relationship, we provide an information treatment to analyze both the direct effects on expectations and action of firms receiving this information and the spillover effects on connected firms that did not directly receive information. In a follow-up three months later, we find direct and spillover effects on expectations and actions that are both significant and of comparable magnitude. An increase in expected GDP growth increases prices and employment; an increase in expected GDP uncertainty reduces prices, investment, and employment. We provide evidence that it is communication between the firms, as opposed to observable actions, driving the spillover effect on the expectations of connected firms. This is consequential as we find communication to be symmetric upstream vs downstream, while propagation via actions is asymmetric. We embed firm-to-firm communication along the supply chain in a New Keynesian pricing problem and discuss its implications for the transmission of aggregate uncertainty to firms' pricing decisions and aggregate inflation.

4. Nirupama Kulkarni (Centre for Advanced Financial Research and Learning, Mumbai)

Title: Financial Repression, Deposit Rate Deregulation and Bank Market Power 

Abstract: Mandating low deposit rates, a form of financial repression, allows banks to raise deposits cheaply and makes investment in government securities profitable but limits credit access. Using regulatory data, we exploit India's 2011 deregulation of savings deposit rates to show that deposit rates increase after deregulation, more so for banks with low market power --- consequently, deposits increase and deposit maturity contracts. These banks shift from low-yielding government securities to loans, including personal, services, and small business loans. Loan maturity shortens to match deposit-maturity shortening. A structural model demonstrates that high-market power banks restrain deposit growth. Deregulation improves financial intermediation, but banks' market power limits gains. 

5. Suranjana Kundu (Paris School of Economics and CESS)

Title: Lower for Longer Monetary Policy and Economic Outcome during COVID-19 Pandemic.

Abstract: The Reserve Bank of India kept the monetary policy rate  persistently low and unrevised  between  May 2020 and  April  2022 to  encourage  economic activity  in battling the  COVID-19  pandemic  shock.  In this  paper,  I argue  that this  stance by the  central  bank,  in contrast to  the  conventional  flexible inflation  targeting, is beneficial for the  economy, especially in the  recovery periods.  I find that eco- nomic  activity  through  increased  capital  demand  and  output by heterogeneous firms led to a slightly  higher share of formal employment, hence a reduced  share of informal labor.  The differences in the magnitude of responses under  the lower for longer stance  versus  the  flexible inflation  targeting are  highest  among  firms with  less volatile  beliefs.  Households,  on the  other  hand,  react  quite  similarly. Among heterogeneous  households,  households  with  formal employment are least impacted  by the pandemic  shocks and they  respond  first to the lower rate.

6. Amol (Ashoka University, Sonepat, Haryana)

Title: Unique Implementation of Permanent Primary Deficits?

Abstract: In an economy with incomplete markets and consumers who are sufficiently risk averse, we show that the government can uniquely implement a permanent primary deficit using nominal debt and continuous Markov strategies for primary deficits and payments to debtholders. But this result fails if there are also useless pieces of paper (bitcoin for short) that can be traded. If there is trade in bitcoin, then there is no continuous Markov strategy for the government that leads to unique implementation. Instead, there is a continuum of equilibria with distinct real allocations in which the price of bitcoin converges to zero. And there is a balanced budget trap: continuous government policies designed for a permanent primary deficit cannot eliminate an alternative steady state in which r - g = 0 and the government is forced to balance its budget. A legal prohibition against bitcoin can restore unique implementation of permanent primary deficits, and so can a tax on bitcoin at the rate -(r - g) > 0.

7. Chetan Ghate (Indian Statistical Institute, Delhi)

Title: Monetary Policy and Informal Labor Markets.

Abstract: A predominant share of employment in EMDEs is in the informal sector. In 2019-2020, approximately 72% of total employment was in the informal sector in India, with casual employment comprising 22% and self-employment comprising 50%. How does informality in labor markets affect inflation stabilization and monetary policy setting? To address this, we build a medium-scale NK-DSGE model with segmented labor markets and search and matching frictions. We calibrate the model to India. As in the data, we divide informal employment into self-employment and casual employment. We show that more formality improves the transmission of monetary policy. We show that a contractionary monetary policy shock leads to a decline in both formal and informal employment (self and casual), suggesting that monetary policy's impact on output and inflation works through informal labor markets as well. Our paper highlights the mechanism behind the transmission of monetary policy in the presence of heterogeneous labor markets.