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Revisiting the empirical existence of the Phillips curve for India

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  • Singh, B. Karan
  • Kanakaraj, A.
  • Sridevi, T.O.

Abstract

This paper revisits the empirical existence of the Phillips curve in the Indian context. To estimate the Phillips curve we need two variables: inflation and the output gap. In the case of India, incorrect measurement of both variables causes much difficulty in estimating the Phillips curve. We use a non-linear Kalman filter approach to estimate the output gap and find that the Kalman filter estimate captures all the dynamics of the economy. Our results show that after taking supply shocks into consideration, there is clear evidence as to the existence of the Phillips curve in India for recent years.

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  • Singh, B. Karan & Kanakaraj, A. & Sridevi, T.O., 2011. "Revisiting the empirical existence of the Phillips curve for India," Journal of Asian Economics, Elsevier, vol. 22(3), pages 247-258, June.
    • Handle: RePEc:eee:asieco:v:22:y:2011:i:3:p:247-258
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    Cited by:

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    2. Bhavesh Salunkhe & Anuradha Patnaik, 2018. "The IS Curve and Monetary Policy Transmission in India: A New Keynesian Perspective," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(1), pages 41-66, February.
    3. Ashima Goyal, 2015. "Understanding High Inflation Trend in India," South Asian Journal of Macroeconomics and Public Finance, , vol. 4(1), pages 1-42, June.
    4. Ashima Goyal & Sritama Ray, 2022. "Exploring correlations between aggregate demand and supply shocks in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2022-004, Indira Gandhi Institute of Development Research, Mumbai, India.
    5. Vijay Victor & Joshy Joseph Karakunnel & Swetha Loganathan & Daniel Francois Meyer, 2021. "From a Recession to the COVID-19 Pandemic: Inflation–Unemployment Comparison between the UK and India," Economies, MDPI, vol. 9(2), pages 1-19, May.
    6. Kapur, Muneesh & Behera, Harendra, 2012. "Monetary Transmission Mechanism in India: A Quarterly Model," MPRA Paper 70631, University Library of Munich, Germany.
    7. Jagadish Prasad Sahu, 2013. "Inflation dynamics in India: A hybrid New Keynesian Phillips Curve approach," Economics Bulletin, AccessEcon, vol. 33(4), pages 2634-2647.
    8. Kapur, Muneesh, 2013. "Revisiting the Phillips curve for India and inflation forecasting," Journal of Asian Economics, Elsevier, vol. 25(C), pages 17-27.
    9. Goyal, Ashima & Tripathi, Shruti, 2015. "Separating shocks from cyclicality in Indian aggregate supply," Journal of Asian Economics, Elsevier, vol. 38(C), pages 93-103.
    10. Syed Kanwar Abbas, 2018. "Global slack hypothesis: evidence from China, India and Pakistan," Empirical Economics, Springer, vol. 54(2), pages 593-627, March.
    11. Harendra Behera & Garima Wahi & Muneesh Kapur, 2017. "Phillips Curve Relationship in India: Evidence from State-Level Analysis," Working Papers id:11973, eSocialSciences.
    12. Saakshi Jha & Sohini Sahu, 2020. "Forecasting inflation for India with the Phillips Curve: Evidence from internet search data," Economics Bulletin, AccessEcon, vol. 40(3), pages 2372-2379.
    13. Behera, Harendra & Wahi, Garima & Kapur, Muneesh, 2018. "Phillips curve relationship in an emerging economy: Evidence from India," Economic Analysis and Policy, Elsevier, vol. 59(C), pages 116-126.
    14. Bhavesh Salunkhe & Anuradha Patnaik, 2019. "Inflation Dynamics and Monetary Policy in India: A New Keynesian Phillips Curve Perspective," South Asian Journal of Macroeconomics and Public Finance, , vol. 8(2), pages 144-179, December.
    15. 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.
    16. Biru Paksha Paul & Hassan Zaman, 2013. "When and Why does Bangladesh’s Inflation Differ from India’s?," Working Papers id:5599, eSocialSciences.
    17. 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, vol. 46(C), pages 56-70.
    18. 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.
    19. Kushal Banik Chowdhury & Kaustav Kanti Sarkar & Srikanta Kundu, 2021. "Nonlinear relationships between inflation, output growth and uncertainty in India: New evidence from a bivariate threshold model," Bulletin of Economic Research, Wiley Blackwell, vol. 73(3), pages 469-493, July.
    20. Ashima Goyal & Gagan Goel, 2021. "Correlated Shocks, Hysteresis, and the Sacrifice Ratio: Evidence from India," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(10), pages 2929-2945, August.
    21. Dinabandhu Sethi & Debashis Acharya, 2018. "Estimating Sectoral Disinflation Cost in India: Some Structural VAR Evidence," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(1), pages 23-46, December.

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    More about this item

    Keywords

    Kalman filter Output gap Inflation;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • A21 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Pre-college

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