Understanding Inflation in India

Laurence Ball, Anusha Chari and Prachi Mishra
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Prachi Mishra: -

India Policy Forum, 2016, vol. 12, issue 1, 1-45

Abstract: This paper examines the behavior of quarterly inflation in India since 1994, both headline inflation and core inflation, as measured by the weighted median of price changes across industries. We explain core inflation with a Phillips curve in which the inflation rate depends on a slow-moving average of past inflation and on the deviation of output from its long-run trend. Headline inflation is more volatile than core: it fluctuates due to large changes in the relative prices of certain industries, which are largely but not exclusively industries that produce food and energy. There is some evidence that changes in headline inflation feed into expected inflation and future core inflation. Several aspects of India’s inflation process are similar to inflation in advanced economies in the 1970s and 1980s.

Keywords: Inflation; Phillips Curve; India (search for similar items in EconPapers)
JEL-codes: E31 E37 E52 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (12)

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