Category: Research Papers

    Chetan Subramanian     Faculty,  Economics & Social Sciences     IIM Bangalore Abstract: This paper studies the choice of monetary policy regime in a small open economy with noise traders in forex markets. We focus on two simple rules: fixed exchange rates and inflation targeting. We contrast the above two rules against optimal policy with commitment under productivity shocks. In general, the presence of noise traders increases the desirability of a fixed exchange rate regime. We also evaluate the welfare impact of Tobin taxes in this milieu. These taxes help…

Journal Article: ‘Financial market segmentation and choice of exchange rate regimes’ Abstract:We study the choice of exchange rate regime in a small open economy with segmented asset markets subjected to financial sector shocks. We show that the state-contingent optimal policy facilitates risk sharing between asset market participants and non-participants, and is counter-cyclical. Our results establish that contrary to existing literature, flexible exchange rates mimic optimal policy and welfare dominates fixed exchange rates. Authors’ Name : Vipul Mathur & Chetan Subramanian URL : http://www.sciencedirect.com/science/article/pii/S0165176516300647 Journal : Economics Letters Volume, Issue, Page Numbers: Volume 142, May 2016,…

Abstract : This article estimates welfare effects of accelerated generic entry via Paragraph-IV challenges. Using data from 2000-2008 for hypertension drugs in the U.S. we estimate demand using a random coefficients logit model. We find consumers gain $42 billion while producers lose $32.5 billion from entry. This modest $9.5 billion gain in social welfare is consistent with our observation that overall consumption does not increase after entry – generic sales displace branded sales, shifting surplus downstream from producers to consumers, insurance companies, and retailers. We demonstrate significant cross-molecular substitution and…