Modeling and Forecasting Inflation in India
September 1, 1999
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Summary
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 future developments in the target variable(s). This paper assesses which indicators provide the most useful information about future inflationary trends. It concludes that while the broad money target has been de-emphasized, developments in the monetary aggregates remain an important indicator of future inflation. The exchange rate and import prices are also relevant, particularly for inflation in the manufacturing sector.
Subject: Consumer price indexes, Inflation, Monetary base, Money, Output gap, Prices, Production, Wholesale price indexes
Keywords: Asia and Pacific, cointegration, Consumer price indexes, excess demand, India, inflation, inflation development, inflation expectation, Monetary base, Output gap, output gap model, price inflation, product inflation, Wholesale price indexes, WP, WPI inflation
Pages:
36
Volume:
1999
DOI:
Issue:
119
Series:
Working Paper No. 1999/119
Stock No:
WPIEA1191999
ISBN:
9781451854152
ISSN:
1018-5941
