Open Access
Subscription Access
Open Access
Subscription Access
Understanding Dynamics of Inflation through P-Star Approach:A Study of Post-Independence India
Subscribe/Renew Journal
This paper tries to understand the dynamics of inflation of India through the lens of P-star approach for the period 1952-1953 to 2013-2014. The equilibrium values for the relevant variables are estimated using two versions of Hodrick-Prescott (HP) filter. Three different types of models have been tested following the P-star approach- Price Gap Model, Output Gap Model and Velocity Gap Model. The study finds satisfactory fit for all models, as all of them reveal expected signs with statistically significant coefficients for the output gap and velocity gap variables. However, forecasting performance shows Output Gap Model as the most appropriate model in understanding inflation in India.
Subscription
Login to verify subscription
User
Font Size
Information
- Adams C., P. Fenton and F. Larsen (1987), Potential Output in Major Industrial Countries, IMF Staff Studies for the World Economic Outlook.
- Azad, R. and A. Das (2015), Has Globalisation Flattened the Phillips Curve?, Economic and Political Weekly, 50(2): 42-48.
- Ball, L.M. and S. Mazumder (2011), Inflation Dynamics and the Great Recession, NBER Working Paper, Working Paper 17044.
- Banerjee, S. (2017), Empirical Regularities of Inflation Volatility: Evidence from Advanced and Developing Countries, South Asian Journal of Macroeconomics and Public Finance, 6(1): 133-156, Sage, Article first published online: June 8, 2017; Issue published: June 1, 2017, https://doi.org/10.1177/2277978717695157(visited http://journals.sagepub.com/doi/abs/10.11 77/2277978717695157on 16.04.2018 at 9.30 PM).
- Basu, K. (2011), Understanding Inflation and Controlling It, Economic and Political Weekly, 46(41): 50-64, October 8.
- Behera, J. and A.K. Mishra (2017), The Recent Inflation Crisis and Long-run Economic Growth in India: An Empirical Survey of Threshold Level of Inflation, South Asian Journal of Macroeconomics and Public Finance, 6(1): 105-132, Sage, Article first published online: June 8, 2017; Issue published: June 1, 2017, https://doi.org/10.1177/2277978717695154 (visitedhttp://journals.sagepub.com/doi/abs/10.1177/2277978717695154 on 16.04.2018 at 8.30 PM).
- Brahmananda, P.R. and G. Nagaraju (2002), Inflation and Growth in the World: Some Simple Empirics, 1970-99, in M.S. Ahluwalia., Y.V. Reddy and S.S. Tarapore (Eds.), Macroeconomics and Monetary Policy: Issues for a Reforming Economy, Oxford University Press.
- Chagny, O. and J. Dopke (2001), Measures of the Output Gap in the Euro-Zone: An Empirical Assessment of Selected Methods, Kiel Working Paper, 1053, Kiel Institute of World Economics.
- Dholakia, R.H. (1990), Extended Phillips Curve for the Indian Economy, Indian Economic Journal, 38(1): 69-78, July-September.
- Dholakia, R.H. and A.A. Sapre (2011), Speed of adjustment and Inflation- Unemployment Trade off in Developing Countries-Case of India, Working paper No. 2011-07-01, IIM, Ahmadabad.
- Gali, J. and M. Gertler (1999), Inflation Dynamics: A Structural Econometric Analysis, Journal of Monetary Economics, 44(2): 195-222.
- Gali, J., M. Gertler and J.D. Lopez-Salido (2001), European Inflation Dynamics, European Economic Review, 45(7): 1237-1270.
- Gordon, Robert. J. (1990), The Phillips Curve Now and Then, Working Paper No. 3393, National Bureau of Economic Research, June.
- ---------- (2013), The Phillips Curve Is Alive and Well: Inflation and NAIRU during the Slow Recovery, Working Paper No. 19390, National Bureau of Economic Research, August.
- Hallman, J.J., R.D. Porter and D.H. Small (1991), Is the Price Level Tied to the M2 Monetary Aggregate in the Long Run?, The American Economic Review, 81(4): 841-858, September.
- Hodrick, R.J. and E.C. Prescott (1997), Postwar U.S. Business Cycles: An Empirical Investigation, Journal of Money, Credit, and Banking, 29(1): 1–16.
- Kapila, Uma (Ed.) (2006), Indian Economy since Independence, Academic Foundation, New Delhi.
- Ladiray, D., G.L. Mazzi and F. Sartori (2003), Statistical Methods for Potential Output Estimation and Cycle Extraction, in Working Papers and Studies, European Commission, Luxembourg.
- Nachane, D.M. and R. Laxmi (2002), Dynamics of Inflation in India: A P-Star Approach, in Ahluwalia, M.S., Y.V. Reddy and S.S. Tarapore (Eds.), Macroeconomics and Monetary Policy: Issues for a Reforming Economy, 67-85, Oxford University Press.
- Parida, P.C., H. Mallick and M. Mathiyazhagan (2001), Fiscal Deficits, Money Supply and Price Level: Empirical Evidence from India, Journal of Indian School of Political Economy, 13(4): 583-593, October-December.
- Paul, S., S.R. Rather and M. Ramachandran (2015), Money and Inflation: Evidence from P-Star Model, Working Paper 115/2015, August, Madras School of Economics, Chennai.
- Rami, G. (2010), Causality between Money, Prices and Output in India (1951-2005): A Granger Causality Approach, Journal of Quantitative Economics, 8(2): 20-41, July.
- Rangarajan, C. (1997), Role of Monetary Policy, Economic and Political Weekly, 32(52): 3325-3328, 27 December- 2 January.
- ---------- (2012), Dynamics of Inflation, The Indian Economic Journal, 60(1): 3-22, April-June.
- Ravn, Morten. O. and H. Uhlig (2002), On Adjusting the Hodrick-Prescott Filter for the Frequency of Observations, Review of Economics and Statistics, 84(2): 371-376.
- Teles, P. and H. Uhlig (2010), Is Quantity Theory Still Alive?, Working Paper No.16393, National Bureau of Economic Research, September.
Abstract Views: 511
PDF Views: 1