Some Recent Developments in Macro-Economics and their Implications for Inflation: Empirical Evidence from India

Quarterly data for India for the period 1973 to 1983 support the existence of an 'Expectation Augmented Phillips Curve'. Our results contradict the hypothesis of the New-classical economists that unanticipated money growth leads to a sudden jump in price level and subsequently only to outout growth. We have, on the other hand, found much empirical support for the Buffer-stock approach to money. In India for this period there is much evidence for the 'Imported Inflation'. It appears that small but continuous exchange-rate depreciation during the period of study for India has not led to inflation.