Inflation and inflation-uncertainty in India: the policy implications of the relationship

Abdur Chowdhury ()

Journal of Economic Studies, 2014, vol. 41, issue 1, 71-86

Abstract: Purpose - – Inflation and its related uncertainty can impose costs on real economic output in any economy. This paper aims to analyze the relationship between inflation and inflation uncertainty in India. Design/methodology/approach - – The methodology uses a generalized autoregressive conditional heteroscedasticity (GARCH) model and Granger Causality test. Findings - – Initial estimates show the inflation rate to be a stationary process. The maximum likelihood estimates from the GARCH model reveal strong support for the presence of a positive relationship between the level of inflation and its uncertainty. The Granger causality results indicate a feedback between inflation and uncertainty. Research limitations/implications - – The research results have important implication for policy makers and especially the Reserve Bank of India. Practical implications - – It provides strong support to the notion of an opportunistic central bank in India. Originality/value - – The results of the paper are of relevance not only to the monetary policy makers but also to academicians in India and other developing countries.

Keywords: Uncertainty; India; Inflation (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Inflation and Inflation-Uncertainty in India: The Policy Implications of the Relationship (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:v:41:y:2014:i:1:p:71-86

DOI: 10.1108/JES-04-2012-0046

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