Paari School of Business is organising a distinguished lecture titled “Optimal Monetary Policy under Informality: A Segmented Markets Perspective” on March 12, 2026. The lecture will be delivered by Prof. Parag Jayant Waknis, Professor of Economics at the Easwari School of Liberal Arts (ESLA), SRM AP.
Abstract
This paper examines optimal monetary policy in economies characterized by formal-informal sector duality, using a model that incorporates segmentation across labor, goods, and financial markets. The formal sector consists of connected households and firms that trade predominantly with one another and access the formal financial system for consumption smoothing and production financing. The informal sector, by contrast, comprises unconnected households and firms that likewise trade primarily within their own network but rely on informal financial arrangements for the same purposes. Under this structure, interest rate changes transmit asymmetrically: connected households absorb policy shocks directly, while unconnected households are affected only indirectly through their trade linkages with the formal sector. Optimal monetary policy is derived as the solution to a benevolent social planner’s problem that accounts explicitly for this market segmentation.
About the Speaker
Prof. Parag Jayant Waknis is a Professor of Economics at the Easwari School of Liberal Arts, SRM University-AP, Amaravati, Andhra Pradesh. He is an experienced macroeconomist and monetary theorist. His research focuses on Monetary Theory and Policy, Macroeconomics, and the Economics of Informality. Prof. Waknis employs New Monetarist models and dynamic macroeconomic frameworks to study developing economies, with particular emphasis on tax evasion, demonetisation, and the macroeconomic implications of affirmative action. He earned his Ph.D. in Economics from the University of Connecticut, USA.