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Expectations Channel of the Monetary Policy in India - A Structural Factor Augmented VAR Approach

Author

Listed:
  • Apica Sharma

    (Department of Economics, IGNOU, India)

Abstract

This study analyses the impact of inflation expectations from 17 July 2016 to 20 August 2022 using the actual future consumer price index (CPI) in the Structural Factor Augmented Vector Autoregressive (SFAVAR) Framework. Around 85 percent of inflation expectations are self-explanatory in the long run. Hence, it is important to keep inflation expectations at historically low levels because in a developing country like India, inflation expectations are rising rapidly but are rigid when falling.

Suggested Citation

  • Apica Sharma, 2022. "Expectations Channel of the Monetary Policy in India - A Structural Factor Augmented VAR Approach," Asian Economics Letters, Asia-Pacific Applied Economics Association, vol. 3(4), pages 1-10.
    • Handle: RePEc:ayb:jrnael:78
    DOI: 2022/11/08
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    References listed on IDEAS

    as
    1. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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    More about this item

    Keywords

    Expectations Channel; Monetary Policy; Structural Factor Augmented VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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