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Searching Threshold Inflation for India

Author

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  • Prakash Singh

    () (Institute of Economic Growth)

Abstract

The present study is an effort to examine econometrically the presence of threshold level of inflation for India, in an environment where expected inflation is in double digit. This upward pressure on inflation is mainly due to rise in food prices; and high investment due to surge in domestic and international demand backed by industrial. High inflation not only costs central bank of the country but, it also affects the output negatively, if it is beyond the tolerable limit. Study uses specification of Sarel (1996) and Khan and Senhadji (2001) to estimate the point of threshold. The estimation result of the study confirms the presence of threshold level of inflation for India at 6 percent inflation rate and thus advocates the view of maintaining inflation rate below 6 percent for the healthy output growth rate in Indian economy. But study fails to confirm the same in Sarel (1996) sense.

Suggested Citation

  • Prakash Singh, 2010. "Searching Threshold Inflation for India," Economics Bulletin, AccessEcon, vol. 30(4), pages 3209-3220.
  • Handle: RePEc:ebl:ecbull:eb-10-00310
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P296.pdf
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    References listed on IDEAS

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    1. Alberto Alesina & Robert J. Barro, 2002. "Currency Unions," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 409-436.
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    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, pages 297-308.
    4. Abigail Barr & Chris Wallace & Jean Ensminger & Juan Camilo Cárdenas, 2009. "Homo Æqualis: A Cross-Society Experimental Analysis of Three Bargaining Games," DOCUMENTOS CEDE 005427, UNIVERSIDAD DE LOS ANDES-CEDE.
    5. J. Peter Neary, 2009. "Putting the "New" into New Trade Theory: Paul Krugman's Nobel Memorial Prize in Economics," Scandinavian Journal of Economics, Wiley Blackwell, pages 217-250.
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    Cited by:

    1. Madhu Sehrawat & A. K. Giri, 2015. "Re-examining the Threshold Effects in Inflation–Growth Nexus: Evidence from India," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(2), pages 57-67, Fabruary.
    2. Kamiar Mohaddes & Mehdi Raissi, 2014. "Does Inflation Slow Long-Run Growth in India?," Cambridge Working Papers in Economics 1440, Faculty of Economics, University of Cambridge.
    3. Nawalage S. Cooray, 2013. "An Empirical Analysis of Inflation-Growth Nexus in Developing Countries: The Case of Sri Lanka," Working Papers EMS_2013_21, Research Institute, International University of Japan.

    More about this item

    Keywords

    E31; E52; F36;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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