Evidence on Inflation Persistence in India
The paper focuses on understanding the concept of inflation persistence in detail and analyzing it in the Indian economy context for the period 1991-2019 using monthly data. The study employs the univariate approach which is the most conventional method of estimating persistence as the sum of estimated autoregressive coefficients. The study estimates the persistence coefficient for the WPI and CPI measures of inflation, and it is found that the WPI measure of inflation is more persistent than the CPI for the period under study. The higher degree of persistence in the WPI inflation can be plausibly credited to higher persistence in the “manufacturing’ and “non-food” categories of overall WPI inflation.
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