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Modeling and Forecasting Inflation in India

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  • Tim Callen
  • Dongkoo Chang

Abstract

The Reserve Bank of India (RBI) has moved away from a broad money target toward a “multiple indicators” approach to the conduct of monetary policy. In adopting such a framework, it is necessary to know which of the many potential indicators provide the most reliable and timely information on future developments in the target variable(s). This paper assesses which indicators provide the most useful information about future inflationary trends. It concludes that while the broad money target has been de-emphasized, developments in the monetary aggregates remain an important indicator of future inflation. The exchange rate and import prices are also relevant, particularly for inflation in the manufacturing sector.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 99/119.

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Length: 36
Date of creation: 01 Sep 1999
Date of revision:
Handle: RePEc:imf:imfwpa:99/119

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Cited by:
  1. N. Kundan Kishor, 2012. "Modeling Inflation In India: The Role Of Money," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 57(04), pages 1250028-1-1.
  2. Jeannine Bailliu & Daniel Garcés & Mark Kruger & Miguel Messmacher, 2003. "Explaining and Forecasting Inflation in Emerging Markets: The Case of Mexico," Working Papers, Bank of Canada 03-17, Bank of Canada.
  3. Ilker Domac, 2003. "Explaining and Forecasting Inflation in Turkey," Working Papers 0306, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  4. Partha Ray & Jorge Somnath Chatterjee, 2001. "The role of asset prices in Indian inflation in recent years: some conjectures," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Modelling aspects of the inflation process and the monetary transmission mechanism in emerging market countries, volume 8, pages 131-150 Bank for International Settlements.
  5. Singh, B. Karan & Kanakaraj, A. & Sridevi, T.O., 2011. "Revisiting the empirical existence of the Phillips curve for India," Journal of Asian Economics, Elsevier, Elsevier, vol. 22(3), pages 247-258, June.
  6. Michael Debabrata Patra & Partha Ray, 2010. "Inflation Expectations and Monetary Policy in India," IMF Working Papers 10/84, International Monetary Fund.
  7. Koffie Ben Nassar, 2005. "Money Demand and Inflation in Madagascar," IMF Working Papers 05/236, International Monetary Fund.
  8. Bank for International Settlements, 2006. "Monetary policy in Asia: approaches and implementation," BIS Papers, Bank for International Settlements, Bank for International Settlements, number 31, 8.
  9. Raghbendra Jha, 2008. "Inflation targeting in India: issues and prospects," International Review of Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 22(2), pages 259-270.
  10. Jalil, Abdul & Tariq, Rabbia & Bibi, Nazia, 2014. "Fiscal deficit and inflation: New evidences from Pakistan using a bounds testing approach," Economic Modelling, Elsevier, Elsevier, vol. 37(C), pages 120-126.
  11. Kaushik Bhattacharya, 2006. "Monetary policy approaches in India," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 74-102 Bank for International Settlements.
  12. Jagadish Prasad Sahu, 2013. "Inflation dynamics in India: A hybrid New Keynesian Phillips Curve approach," Economics Bulletin, AccessEcon, vol. 33(4), pages 2634-2647.
  13. Riccardo Cristadoro & Giovanni Veronese, 2011. "Policy Focus: Monetary policy in India: is something amiss?," Indian Growth and Development Review, Emerald Group Publishing, Emerald Group Publishing, vol. 4(2), pages 166-190, September.
  14. Zavkidjon Zavkiev, 2005. "Estimating A Model Of Inflation In Tajikistan," CAMA Working Papers 2005-27, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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