IDEAS home Printed from https://ideas.repec.org/a/eee/asieco/v20y2009i4p479-488.html
   My bibliography  Save this article

In search of the Phillips curve for India

Author

Listed:
  • Paul, Biru Paksha

Abstract

The economics literature suggests that the Phillips curve is nonexistent in India. This study finds that supply shocks, namely droughts and oil crises, and the liberalization-policy shock of the early 1990s are the main reasons for the absence of the Phillips curve in India. Once I account for these shocks by reconstructing the data of inflation and the output gap in crop year instead of fiscal year, and move to the industrial sector, the Phillips curve emerges in the conventional fashion. Thus, the short-run tradeoff between inflation and industrial output is still possible in India, as it is in other developed economies.

Suggested Citation

  • Paul, Biru Paksha, 2009. "In search of the Phillips curve for India," Journal of Asian Economics, Elsevier, vol. 20(4), pages 479-488, September.
  • Handle: RePEc:eee:asieco:v:20:y:2009:i:4:p:479-488
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1049-0078(09)00038-4
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jeremy Rudd & Karl Whelan, 2006. "Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics?," American Economic Review, American Economic Association, vol. 96(1), pages 303-320, March.
    2. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
    3. Gruen, David & Pagan, Adrian & Thompson, Christopher, 1999. "The Phillips curve in Australia," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 223-258, October.
    4. Ravi Balakrishnan & J David Lopez-Salido, 2002. "Understanding UK inflation: the role of openness," Bank of England working papers 164, Bank of England.
    5. Robert J. Gordon, 1975. "Alternative Responses of Policy to External Supply Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1), pages 183-206.
    6. Fabio Rumler, 2007. "Estimates of the Open Economy New Keynesian Phillips Curve for Euro Area Countries," Open Economies Review, Springer, vol. 18(4), pages 427-451, September.
    7. Pami Dua & Anirvan Banerji, 2001. "An Indicator Approach to Business and Growth Rate Cycles: The Case of India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 36(1), pages 55-78, January.
    8. Makin, John H, 1982. "Anticipated Money, Inflation Uncertainty and Real Economic Activity," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 126-134, February.
    9. Scheibe, Jörg & Vines, David, 2005. "A Phillips Curve for China," CEPR Discussion Papers 4957, C.E.P.R. Discussion Papers.
    10. Sbordone, Argia M., 2002. "Prices and unit labor costs: a new test of price stickiness," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 265-292, March.
    11. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-984, November.
    12. D. M. Nachane & R. Lakshmi, 2002. "Dynamics of inflation in India - a P-Star approach," Applied Economics, Taylor & Francis Journals, vol. 34(1), pages 101-110.
    13. Ilker Domac, 2003. "Explaining and Forecasting Inflation in Turkey," Working Papers 0306, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    14. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678-678.
    15. Ghani, Ejaz, 1991. "Rational expectations and price behavior : A study of India," Journal of Development Economics, Elsevier, vol. 36(2), pages 295-311, October.
    16. Ahluwalia, Isher J., 1979. "An analysis of price and output behavior in the Indian economy: 1951-1973," Journal of Development Economics, Elsevier, vol. 6(3), pages 363-390, August.
    17. Gordon, Robert J, 1977. "The Theory of Domestic Inflation," American Economic Review, American Economic Association, vol. 67(1), pages 128-134, February.
    18. Madhur, Srinivasa & Roy, Prannoy, 1986. "Price setting in Indian industry," Journal of Development Economics, Elsevier, vol. 20(2), pages 205-224, March.
    19. Dutta Roy, Sudipta & Darbha, Gangadhar, 2000. "Dynamics of money, output and price interaction -- some Indian evidence," Economic Modelling, Elsevier, vol. 17(4), pages 559-588, December.
    20. Ramachandran, M., 2004. "Do broad money, output, and prices stand for a stable relationship in India?," Journal of Policy Modeling, Elsevier, vol. 26(8-9), pages 983-1001, December.
    Full references (including those not matched with items on IDEAS)

    Corrections

    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:eee:asieco:v:20:y:2009:i:4:p:479-488. 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: (Haili He). General contact details of provider: http://www.elsevier.com/locate/asieco .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.