Inflation targeting and price behaviour: evidence from India

Amlendu Dubey () and Juhi Lohani
Additional contact information
Amlendu Dubey: Indian Institute of Technology Delhi
Juhi Lohani: Indian Institute of Technology Delhi

Indian Economic Review, 2022, vol. 57, issue 2, No 2, 265-284

Abstract: Abstract We study the individual price behaviour in India using monthly item-wise CPI prices during 2011–2019 and explore the impact of implementation of inflation targeting on price behaviour. We find that inflation targeting has significantly reduced the frequency of price increases and increased the frequency of price decreases in India; however, it has not been successful in reducing the dispersions in price increases or price decreases, a measure of welfare cost of inflation. We find that another monetary policy event during our period of analysis, demonetization, led to fall in the spread of price increases and rise in the spread of price decreases. Further, we find that increase in monthly inflation increases the frequency of price increases and decreases the frequency of price decreases which is as per the expectations. Overall, our results have important implications for the effectiveness of monetary policy in India in achieving price stability.

Keywords: Inflation targeting; Demonetization; Frequency of price changes; Inflation; India (search for similar items in EconPapers)
JEL-codes: C26 E31 E52 E61 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s41775-022-00148-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:inecre:v:57:y:2022:i:2:d:10.1007_s41775-022-00148-7

Ordering information: This journal article can be ordered from
https://www.springer.com/economics/journal/41775

DOI: 10.1007/s41775-022-00148-7

Access Statistics for this article

Indian Economic Review is currently edited by Uday Bhanu Sinha, Abhijit Banerji, Shreekant Gupta and J.V. Meenakshi

More articles in Indian Economic Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().