Inflation expectations of households in India: Role of oil prices, economic policy uncertainty, and spillover of global financial uncertainty

Taniya Ghosh, Sohini Sahu and Siddhartha Chattopadhyay

Bulletin of Economic Research, 2021, vol. 73, issue 2, 230-251

Abstract: Inflation expectations are an important marker for the conduct of monetary policy. Using a Bayesian structural VAR‐X model we analyze the macroeconomic factors that determine inflation expectations of the general public in India. Besides the standard macroeconomic factors such as output, inflation rate, monetary policy, and exchange rate, we include economic policy uncertainty as an endogenous variable, while international factors such as oil prices and financial volatility that have spill‐over effects are included as exogenous variables. We find that oil prices and the exchange rate have considerable effects on expectations of inflation, and that in a longer horizon, international financial volatility also matters. Our model generates results free from the “price puzzle” and the “exchange rate puzzle” that otherwise exist in the literature on monetary transmission mechanisms for India.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://doi.org/10.1111/boer.12244

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:bla:buecrs:v:73:y:2021:i:2:p:230-251

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0307-3378

Access Statistics for this article

More articles in Bulletin of Economic Research from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().