{
  "title": "Inflation Expectations and Monetary Policy in India: An Empirical Exploration",
  "publication": "IMF Working Papers, April 1, 2010",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/inflation-expectations-and-monetary-policy-in-india-an-empirical-exploration-23719",
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  "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",
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      "heading": "Summary",
      "content": "- The paper pursues a computationally intensive approach to generate future inflation.\n- It explores the determinants of inflation expectations by estimating a new Keynesian type Phillips curve that takes into account:\n  - country-specific characteristics,\n  - the stance of monetary and fiscal policies,\n  - marginal costs, and\n  - exogenous supply shocks.\n- Empirical results indicate that high and climbing inflation could easily seep into people’s anticipation of future inflation and linger.\n- 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."
    },
    {
      "heading": "Empirical approach and findings",
      "content": "- Methodology:\n  - Computationally intensive generation of future inflation paths.\n  - Estimation of a new Keynesian type Phillips curve incorporating multiple country- and policy-specific factors.\n- Key empirical finding:\n  - Persistence of inflation expectations: high and climbing inflation tends to become embedded in expectations and can persist.\n- Drivers analyzed:\n  - Monetary policy stance,\n  - Fiscal policy stance,\n  - Marginal costs,\n  - Exogenous supply shocks,\n  - Country-specific characteristics."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Monetary policy should address inflation proactively to preserve or build reputational credibility.\n- Delayed or reactionary “cold turkey” tightening when societal pressures are at a critical mass is suboptimal compared with earlier action to counter rising inflation expectations.\n\n---\n\n Content in this bundle\n\n- wp1084\n  - wp1084 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1084 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/inflation-expectations-and-monetary-policy-in-india-an-empirical-exploration-23719"
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    "Authors: Michael Debabrata Patra, Partha Ray",
    "Published: April 1, 2010",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451982640.001",
    "The paper pursues a computationally intensive approach to generate future inflation.",
    "It explores the determinants of inflation expectations by estimating a new Keynesian type Phillips curve that takes into account:",
    "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.",
    "Methodology:",
    "Key empirical finding:",
    "Drivers analyzed:",
    "Monetary policy should address inflation proactively to preserve or build reputational credibility.",
    "Delayed or reactionary “cold turkey” tightening when societal pressures are at a critical mass is suboptimal compared with earlier action to counter rising inflation expectations.",
    "**_wp1084**"
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