Inflation Expectations and Monetary Policy in India: An Empirical Exploration

Michael Patra and Partha Ray

No 2010/084, IMF Working Papers from International Monetary Fund

Abstract: This paper pursues a computationally intensive approach to generate future inflation, followed by an exploration of the determinants of inflation expectations by estimating a new Keynesian type Phillips curve that takes into account country-specific characteristics, the stance of monetary and fiscal policies, marginal costs and exogenous supply shocks. The empirical results indicate that high and climbing inflation could easily seep into people’s anticipation of future inflation and linger. There is a reputational bonus for monetary policy to act against inflation now rather than going for cold turkey when societal compulsions reach a critical mass.

Keywords: WP; inflation expectation; WPI inflation projection; consumer price; expectations survey; inflation pressure; Inflation; India; Monetary Policy; inflation process; inflation concern; inflation risk; Real interest rates; Wholesale price indexes; Food prices; Consumer price indexes; Global (search for similar items in EconPapers)
Pages: 26
Date: 2010-04-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=23719 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2010/084

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().