SAMVAD: International Journal of Management

Open Access Open Access  Restricted Access Subscription Access

Evidence on Inflation Persistence in India


Affiliations
1 Assistant Professor, Department of Economics, University of Rajasthan, JLN Marg, Jaipur – 302004, Rajasthan, 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.


Keywords

Inflation, Indian Economy, Inflation Persistence
User
Notifications
Font Size

  • Andrews, D. W., & Chen, H. Y. (1994). Approximately median-unbiased estimation of autoregressive models. Journal of Business & Economic Statistics, 12(2), 187-204. https://doi.org/10.1080/07350015.1994.10510007

  • Batini, N. (2006). euro area inflation persistence. Empirical Economics, 31(4), 977-1002. https://doi.org/10.1007/ s00181-006-0064-7

  • Batini, N., & Nelson, E. (2001). The lag from monetary policy actions to inflation: Friedman revisited. International Finance, 4(3), 381-400. https://doi.org/10.1111/1468- 2362.00079

  • Cogley, T., and Sargent, T.J. (2001). Evolving post-world war II US inflation dynamics. NBER Macroeconomics Annual, 16, 331-373. https://doi.org/10.1086/654451

  • Dossche, M. (2009). Understanding inflation dynamics: Where do we stand (National Bank of Belgium Working Paper No. 165). National Bank of Belgium. Available at: https://www.nbb.be/doc/ts/publications/wp/wp165en. pdf?language=de. https://doi.org/10.2139/ssrn.1684013

  • Friedman, M. (1972). Have monetary policies failed? The American Economic Review, 62(1/2), 11-18.

  • Friedman, M., & Schwartz, A. J. (1982). Monetary trends in the United States and the United Kingdom: their relations to income, prices, and interest rates. University of Chicago Press. https://doi.org/10.7208/ chicago/9780226264257.001.0001

  • Fuhrer, J. C. (2010). Inflation Persistence. In B.M. Friedman and M. Woodford (Eds.), Handbook of monetary economics. San Diego: Elsevier. 3, 423-486. https://doi. org/10.1016/B978-0-444-53238-1.00009-0

  • Fuhrer, J., & Moore, G. (1995). Inflation persistence. The Quarterly Journal of Economics, 110(1), 127-159. https://doi.org/10.2307/2118513

  • Keynes, J. M. (1913). Indian Currency and Finance. London: Macmillan and Company.

  • Keynes, J. M. (1923). A Tract on Monetary Reform. London: Macmillan and Company.

  • Khundrakpam, J. K. (2008). How persistent is indian inflationary process, has it changed? Reserve Bank of India Occasional Papers, 29(2).

  • Kumar, P., & Mitra, P. (2012). Fiscal stance, credibility and inflation persistence in India (RBI Working Paper Series No. 13). Reserve Bank of India. Available at: https://rbidocs.rbi.org.in/rdocs/publications/pdfs/wp13fsc250712.pdf

  • Kuttner, K. N., & Posen A. S. (2001). Beyond Bipolar: A three-dimensional assessment of monetary frameworks. International Journal of Finance and Economics, 6, 369- 87. https://doi.org/10.1002/ijfe.167

  • Marques, C. R. (2004). Inflation persistence: Facts or artefacts (ECB Working Paper No. 371). European Central Bank. Available at: https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp371.pdf.

  • Patra, M. D., & Ray, P. (2010). Inflation expectations and monetary policy in India: An empirical exploration (IMF Working Paper No. 10/84). International Monetary Fund. Available at: https://www.elibrary.imf.org/view/journals/001/2010/084/001.2010.issue-084-en.xml. https://doi.org/10.5089/9781451982640.001

  • Patra, M. D., Khundrakpam, J. K., & George, A. T. (2014). Post-global crisis inflation dynamics in India: what has changed. India Policy Forum. National Council of Applied Economic Research, 10(1), 117-203. Available at: https://www.ncaer.org/uploads/photogallery/files/1432105116India%20Policy%20Forum%202013-14,%20Volume%2010.pdf#page=142.

  • Perron, P. (1989). The great crash, the oil price shock, and the unit root hypothesis. Econometrica, 1361-1401. https://doi.org/10.2307/1913712

  • Pivetta, F., & Reis, R. (2004). The persistence of inflation in the United States. Manuscript, Harvard University.

  • Taylor, John B. (2000). Low inflation, pass-through, and the pricing power of firms. European Economic Review, 44, 1389-1408. https://doi.org/10.1016/S0014-2921(00)00037-4

  • Willis, J. L. (2003). Implications of structural changes in the US economy for pricing behavior and inflation dynamics. Economic Review-Federal Reserve Bank of Kansas City, 88(1), 5-28.


Abstract Views: 258

PDF Views: 128




  • Evidence on Inflation Persistence in India

Abstract Views: 258  |  PDF Views: 128

Authors

Swapnil Bhardwaj
Assistant Professor, Department of Economics, University of Rajasthan, JLN Marg, Jaipur – 302004, Rajasthan, India

Abstract


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.


Keywords


Inflation, Indian Economy, Inflation Persistence

References





DOI: https://doi.org/10.53739/samvad%2F2022%2Fv25%2F172414