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Asymmetries in Inflation Volatility:Evidence from India


Affiliations
1 Department of Economics, University of Rajasthan, JLN Marg, Jaipur - 302004, Rajasthan, India
 

This paper records the volatility and asymmetry present in Indian inflation. The study uses monthly data from January 1991 to December 2016 of Wholesale Price Index (WPI) and Consumer Price Index (CPI) inflation to examine and model the volatility in the backdrop of changes in the monthly Crude Oil and Gold Prices. The methodology uses a generalized autoregressive conditional heteroskedasticity (GARCH) model along with exponential GARCH (EGARCH) and threshold GARCH (TGARCH). The analysis reveals that crude oil and gold price affect WPI and CPI differently. While crude oil price seems to be an insignificant factor contributing to CPI volatility, gold price emerges as a consequential factor influencing WPI inflation volatility.

 


Keywords

EGARCH, Inflation Uncertainty, TGARCH.
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  • Asymmetries in Inflation Volatility:Evidence from India

Abstract Views: 406  |  PDF Views: 110

Authors

Swapnil Bhardwaj
Department of Economics, University of Rajasthan, JLN Marg, Jaipur - 302004, Rajasthan, India

Abstract


This paper records the volatility and asymmetry present in Indian inflation. The study uses monthly data from January 1991 to December 2016 of Wholesale Price Index (WPI) and Consumer Price Index (CPI) inflation to examine and model the volatility in the backdrop of changes in the monthly Crude Oil and Gold Prices. The methodology uses a generalized autoregressive conditional heteroskedasticity (GARCH) model along with exponential GARCH (EGARCH) and threshold GARCH (TGARCH). The analysis reveals that crude oil and gold price affect WPI and CPI differently. While crude oil price seems to be an insignificant factor contributing to CPI volatility, gold price emerges as a consequential factor influencing WPI inflation volatility.

 


Keywords


EGARCH, Inflation Uncertainty, TGARCH.

References