Inflation Expectations and Monetary Policy in India: An Empirical Exploration

April 1, 2010

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Michael Debabrata Patra, and Partha Ray. Inflation Expectations and Monetary Policy in India: An Empirical Exploration, (USA: International Monetary Fund, 2010) accessed November 8, 2024

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.

Subject: Consumer price indexes, Financial services, Food prices, Inflation, Prices, Real interest rates, Wholesale price indexes

Keywords: Consumer price, Consumer price indexes, Expectations survey, Food prices, Global, India, Inflation, Inflation concern, Inflation expectation, Inflation pressure, Inflation process, Inflation risk, Monetary Policy, Real interest rates, Wholesale price indexes, WP, WPI inflation projection

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/084
Stock No:

WPIEA2010084
ISBN:

9781451982640
ISSN:

1018-5941

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