 A Markov Chain Model of Inflation in IndiaVijayamohanan Pillai N
Indian Economic Review, 2002, vol. 37, issue 1, 91-116 Abstract: In this paper, we advance a Markov chain model for price movements in India, based on the general as well as a selected set of sectional wholesale price indices and on the three consumer price indices for 240 months from April 1981 to March 2001. The estimation period has been divided into two, viz., pre-liberalisation and post-liberalisation, of 10 years each. We consider 3 general states of monthly price changes-positive (tentatively suggesting inflation), negative (deflation), and zero (stable prices), and estimate the state transition probabilities and the steady state probabilities along with the return periods of these three states of price level changes. It is found that in general the state of inflation persists with a high probability and a much shorter return period in India. This indicates that price rises have been cumulative and hence inflationary in effect. Keywords: India; Inflation; Markov chains; State transition Probability; Steady state probability; Return Period (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:dse:indecr:v:37:y:2002:i:1:p:91-116 Ordering information: This journal article can be ordered from Access Statistics for this article Indian Economic Review is currently edited by Pami Dua (Editor) & Ram Singh (Associate Editor) and Sunil Kanwar More articles in Indian Economic Review from Department of Economics, Delhi School of Economics University of Delhi, Delhi 110 007. Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.