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Is Inflation in India an Attractor of Inflation in Nepal?

Author/Editor: Ginting, Edimon
Authorized for Distribution: November 1, 2007
Electronic Access: Free Full Text (PDF file size is 445KB)
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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: The paper attempts to answer some important questions around the inflationary process in Nepal, particularly the transmission of inflation from India. Because the Nepali currency is pegged to the Indian rupee and the two countries share an open border, price developments in Nepal would be expected to mirror to those in India. The results show that inflation in India and inflation in Nepal tend to converge in the long run. Our estimates indicate that the passthrough of inflation from India to Nepal takes about seven months. The paper draws some implications for the conduct of monetary policy in Nepal.
 
Series: Working Paper No. 07/269
Subject(s): Inflation | Nepal | India | Currency pegs
Author's keyword(s): Nepal | India | inflation
 
English  
    Published:   November 1, 2007        
            Format:   Paper
    Stock No:   WPIEA2007269   Pages:   30
    Price:   US$18.00
       
     
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