IDEAS home Printed from
   My bibliography  Save this article

Casualty and Error Correction in Markov Chain: Inflation in India Revisited


  • Vijayamohanan Pillai N.

    (Centre for Development Studies, Thiruvananthapuram, Kerala, India)


The present paper proposes certain statistical tests, both conceptually simple and computationally easy, for analysing state-specific prima facie probabilistic causality and error correction mechanism in the context of a Markov chain of time series data arranged in a contingency table of present versus previous states. It thus shows that error correction necessarily follows causality (that is temporal dependence) or vice versa, apparently suggesting that the two represent the same aspect! The study also yields a simple estimate of steady state probabilities of a Markov chain from such time-series data, useful when the number of states considered is very large. The result is applied to an analysis of inflation in India during the last three decades separately and also together based on the monthly general price level (WPI - all commodities) and 23 constituent groups/items, as well as on the three consumer price index (CPI) numbers.

Suggested Citation

  • Vijayamohanan Pillai N., 2006. "Casualty and Error Correction in Markov Chain: Inflation in India Revisited," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 41(1), pages 25-54, July.
  • Handle: RePEc:dse:indecr:v:41:y:2006:i:1:p:25-54

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item


    Markov chain; Steady state probability; India; Inflation; Return period.;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dse:indecr:v:41:y:2006:i:1:p:25-54. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Pami Dua). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.