 What influences aggregate inflation expectations of households in India?Ashima Goyal and Prashant Parab Journal of Asian Economics, 2021, vol. 72, issue C Abstract: We analyse the factors influencing Indian households’ inflation expectations and draw out implications for inflation targeting. The literature finds news on inflation affecting expectations. Using quarterly data from India over 2008–2019, we find: (i) in estimated epidemiological models of learning in expectation formation, the response coefficient on inflation news in the shape of central bank forecasts exceeds coefficients estimated for advanced economies, implying official views having a relatively greater weight on expectations; (ii) error variance decompositions of expectations to shocks in variables including commodity and core inflations, demand and policy variables in a series of SVARs, also show policy communications affecting expectations in the short-term. Food inflation has a significant short-run effect on expectations, but demand determined core inflation dominates over the long run; (iii) impulse responses show a rise in the policy rate raising expectations. The above results show communications as more effective than policy rates in influencing inflation expectations. Keywords: Household; Inflation expectations; Inflation targeting; Structural vector auto regression; Central bank communications (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:72:y:2021:i:c:s1049007820301408 DOI: 10.1016/j.asieco.2020.101260 Access Statistics for this article Journal of Asian Economics is currently edited by C. Wiemer More articles in Journal of Asian Economics from Elsevier |
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