Inflation Expectations and Monetary Policy in India: An Empirical Exploration

 
Author/Editor: Debabrata Patra, Michael ; Ray, Partha
 
Publication Date: April 01, 2010
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper pursues a computationally intensive approach to generate future inflation, followed by an exploration of the determinants of inflation expectations by estimating a new Keynesian type Phillips curve that takes into account country-specific characteristics, the stance of monetary and fiscal policies, marginal costs and exogenous supply shocks. The empirical results indicate that high and climbing inflation could easily seep into people’s anticipation of future inflation and linger. There is a reputational bonus for monetary policy to act against inflation now rather than going for cold turkey when societal compulsions reach a critical mass.
 
Series: Working Paper No. 10/84
Subject(s): Central bank policy | Economic models | Fiscal policy | India | Inflation | Inflation targeting | Monetary policy | Price increases | Supply-side policy

Author's Keyword(s): Inflation | Inflation Expectation | India | Monetary Policy
 
English
Publication Date: April 01, 2010
Format: Paper
Stock No: WPIEA2010084 Pages: 26
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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