RBI Autonomy and Performance of Monetary Policy and Macro-economy in India in Post Liberalization Period

The auto regressive distributed lag (ARDL) bound test has been employed to examine the presence of long-run relationship of inflation, exchange rate and stock price with Reserve Bank of India's (RBI) autonomy. The short-run and long-run causal effects of RBI autonomy on these variables have also been captured. Construction of RBI autonomy index suggest that some Governors exercised more autonomy as compared to the others. Results find insignificant negative association between RBI autonomy and inflation in India. RBI autonomy has negative influence on exchange rate and stock price in the long-run and a positive effect on stock prices in the short-run.