Assessing Central Bank Commitment to Inflation Targeting in Emerging Economies: Evidence From India

Vaishali Garga (), Aeimit Lakdawala and Rajeswari Sengupta ()
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Vaishali Garga: Federal Reserve Bank of Boston, https://sites.google.com/view/vaishaligarga/home
Rajeswari Sengupta: Indira Gandhi Institute of Development Research, https://sites.google.com/view/rasesite/

No 107, Working Papers from Wake Forest University, Economics Department

Abstract: We propose a novel framework to gauge the credibility of a central bank’s commitment to inflation targeting. Our framework combines survey data on macroeconomic forecasts with financial market data to estimate how market-perceived responsiveness of the central bank to inflation evolves with the adoption of inflation targeting. This approach is especially suitable for emerging economies, many of which have adopted an inflation targeting framework but lack data on long-run inflation expectations. We apply our framework to study the adoption of inflation targeting in India. We find that the Reserve Bank of India’s commitment to inflation targeting is viewed as credible.

Keywords: Macroeconomic forecasts; Financial markets; Credibility; Inflation Targeting; Inflation expectations. (search for similar items in EconPapers)
JEL-codes: E44 E47 E52 E58 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2024-03-04
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:wfuewp:0107

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