Core Inflation Dynamics and Impact of Demand and Supply Shocks: Evidence from India

Priyanka Sahu () and Naresh Kumar Sharma
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Priyanka Sahu: University of Hyderabad
Naresh Kumar Sharma: University of Hyderabad

Chapter Chapter 1 in Current Issues in the Economy and Finance of India, 2018, pp 3-25 from Springer

Abstract: Abstract This paper attempts to investigate the impact of demandDemand and supply side factors on core inflationCore inflation in IndiaIndia . First, we empirically calculate core inflationCore inflation through conventional exclusion based measure (excluding food, excluding energy and excluding both food and energy) as well as statistical measure (asymmetric trimmed mean approach). Next, we empirically try to observe the association of core inflationCore inflation with macroeconomic variablesMacroeconomic variables through autoregressive-distributed lag model (ARDLARDL ) and bound test approach. Empirical findings based on ARDL bound test approachARDL Bound Test approach confirms the existence of short run and long run association of core inflationCore inflation with macroeconomic variablesMacroeconomic variables . Overall, the response of core inflationCore inflation to demandDemand -side factors is high in case of real variables as compared to monetary variables and its response to skewnessSkewness -based supply-side factor is high as compared to food and fuel inflationInflation .

Keywords: Core inflation; Demand shock; Supply shock; ARDL bound test approach (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-319-99555-7_1

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DOI: 10.1007/978-3-319-99555-7_1

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