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In search of the Phillips curve for India

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  • 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
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Tiwari, Aviral Kumar & Oros, Cornel & Albulescu, Claudiu Tiberiu, 2014. "Revisiting the inflation–output gap relationship for France using a wavelet transform approach," Economic Modelling, Elsevier, pages 464-475.
    2. Mihaela Simionescu, 2014. "Testing The Existence And Stability Of Phillips Curve In Romania," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 10(1), pages 67-74.
    3. Jagadish Prasad Sahu, 2013. "Inflation dynamics in India: A hybrid New Keynesian Phillips Curve approach," Economics Bulletin, AccessEcon, vol. 33(4), pages 2634-2647.
    4. Kapur, Muneesh, 2013. "Revisiting the Phillips curve for India and inflation forecasting," Journal of Asian Economics, Elsevier, pages 17-27.
    5. Biswajit Maitra, 2016. "Inflation Dynamics in India: Relative Role of Structural and Monetary Factors," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(2), pages 237-255, December.
    6. Singh, B. Karan & Kanakaraj, A. & Sridevi, T.O., 2011. "Revisiting the empirical existence of the Phillips curve for India," Journal of Asian Economics, Elsevier, pages 247-258.
    7. Goyal, Ashima & Tripathi, Shruti, 2015. "Separating shocks from cyclicality in Indian aggregate supply," Journal of Asian Economics, Elsevier, pages 93-103.
    8. repec:gam:jecomi:v:5:y:2017:i:4:p:49-:d:122367 is not listed on IDEAS
    9. Holtemöller, Oliver & Mallick, Sushanta, 2016. "Global food prices and monetary policy in an emerging market economy: The case of India," Journal of Asian Economics, Elsevier, pages 56-70.
    10. Mohammad Naim Azimi, 2016. "Drawing on Phillips curve: does the inverse relation between inflation and unemployment persist in transitional economies," International Journal of Economics and Accounting, Inderscience Enterprises Ltd, pages 89-100.
    11. repec:ovi:oviste:v:xvii:y:2017:i:1:p:242-247 is not listed on IDEAS
    12. Sunil Paul & Sartaj Rasool Rather & M. Ramachandran, 2015. "Money and Inflation: Evidence from P-Star Model," Working Papers 2015-115, Madras School of Economics,Chennai,India.
    13. Dholakia, Ravindra H., 2014. "Cost and Benefit of Disinflation Policy in India," IIMA Working Papers WP2014-02-08, Indian Institute of Management Ahmedabad, Research and Publication Department.
    14. Mazumder, Sandeep, 2011. "The stability of the Phillips curve in India: Does the Lucas critique apply?," Journal of Asian Economics, Elsevier, pages 528-539.
    15. Ashima Goyal & Shruti Tripathi, 2015. "Separating Shocks from Cyclicality in Indian Aggregate Supply," Working Papers id:6673, eSocialSciences.
    16. Mohanty, Deepak & John, Joice, 2015. "Determinants of inflation in India," Journal of Asian Economics, Elsevier, pages 86-96.
    17. Goyal, Ashima & Tripathi, Shruti, 2015. "Separating shocks from cyclicality in Indian aggregate supply," Journal of Asian Economics, Elsevier, pages 93-103.

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