Inflation and Inflation Uncertainty in India, 1957 - 2005

John Thornton

Indian Economic Review, 2006, vol. 41, issue 1, 1-8

Abstract: This note, employing a GARCH model, finds a positive and significant relationship between the level and variability of monthly inflation in India in the period 1957-2005, with causation running from inflation to uncertainty about future inflation, as hypothesized by Friedman. To the extent that inflation uncertainty has negative output effects, this strengthens the case for the central bank to focus on price stability as one of the prime objectives of monetary policy.

Keywords: Inflation; inflation uncertainty; conditional variance (search for similar items in EconPapers)
JEL-codes: C22 E31 (search for similar items in EconPapers)
Date: 2006
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