Does Inflation-Unemployment Trade-Off Exist in India?

Ravindra H. Dholakia

IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: The hypothesis of Extended Phillips Curve is examined in the present paper using the Indian data over the period 1950-51 to 1984-85. The empirical evidence does not suggest any substantial trade-off between inflation and unemployment even in the short run in the LDCs like India. The labor markets in the LDCs have such characteristics, which bring them very close to the Keynesian aggregate supply curve in the short run. The formation of inflationary expectation in the study is based on adaptive expectations. The findings of the study have important implication for the choice of the strategy to deal with adverse supply shocks in LDCs.

Date: 1987-12-01
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Persistent link: https://EconPapers.repec.org/RePEc:iim:iimawp:wp00796

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