Expectations Channel of the Monetary Policy in India - A Structural Factor Augmented VAR Approach

Apica Sharma ()
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Apica Sharma: Department of Economics, IGNOU, India

Asian Economics Letters, 2022, vol. 3, issue 4, 1-10

Abstract: This study analyses the impact of inflation expectations from 17 July 2016 to 20 August 2022 using the actual future consumer price index (CPI) in the Structural Factor Augmented Vector Autoregressive (SFAVAR) Framework. Around 85 percent of inflation expectations are self-explanatory in the long run. Hence, it is important to keep inflation expectations at historically low levels because in a developing country like India, inflation expectations are rising rapidly but are rigid when falling.

Keywords: Expectations Channel; Monetary Policy; Structural Factor Augmented VAR (search for similar items in EconPapers)
JEL-codes: C32 C38 E52 E58 (search for similar items in EconPapers)
Date: 2022
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