By adopting a VAR framework in first differences, recent literature has confirmed previous results in testing the macro rational-expectations hypotheses of rationality and neutrality: rationality is corroborated, neutrality is rejected. However, this paper shows that, by correctly incorporating...

The Reserve Bank of India (RBI) has moved away from a broad money target toward a “multiple indicators” approach to the conduct of monetary policy. In adopting such a framework, it is necessary to know which of the many potential indicators provide the most reliable and timely information on...