Dynamics of inflation in India - a P-Star approach
AbstractP-Star models have become increasingly popular in recent years in developed countries. However data constraints have limited their applicability to the LDCs. In this paper, such a model is attempted for India using both annual and quarterly data for the period 1955-1995. It is found that velocity in India is trend stationary and using cointegration techniques it is then possible to develop a model to gauge inflationary pressures in the economy. The model is well calibrated to data, and in out-of-sample forecasts, it significantly outperforms a seasonal ARMA benchmark model. The velocity gap version of the model is particularly successful.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 34 (2002)
Issue (Month): 1 ()
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- Melecky, Martin, 2008. "An alternative framework for foreign exchange risk management of sovereign debt," Policy Research Working Paper Series 4458, The World Bank.
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