IDEAS home Printed from https://ideas.repec.org/a/spr/apjors/v9y2025i2d10.1007_s41685-025-00381-x.html
   My bibliography  Save this article

Impact of climate and economic policy uncertainties on inflation in India: using the vector error correction model approach

Author

Listed:
  • A. Akshaya

    (National Institute of Technology Karnataka)

  • B. V. Gopalakrishna

    (National Institute of Technology Karnataka)

Abstract

Economic policies are designed to address challenges in the economic environment and mitigate future associated risks and uncertainties. The present study addressed the impact of policy uncertainties such as climate policy uncertainty (CPU) and economic policy uncertainty (EPU) on price inflation in India. The data were sourced from the Reserve Bank of India and Policy Uncertainty databases from April 2004 to March 2024. Descriptive statistics and stationarity tests were conducted to analyze the characteristics of the variables. Johansen’s cointegration test assessed the long-term relationships among the regressors. The vector error correction model (VECM) and impulse response function (IRF) were used to evaluate long-run equilibrium dynamics and the responsiveness of inflation to policy uncertainties. The empirical outcomes specified a significant relationship between inflation and economic policy uncertainty, while climate policy uncertainty exhibited an insignificant positive effect on inflation. These findings suggest that policy uncertainties influence inflation and broader economic stability. The study emphasizes the importance of formulating coherent and stable economic policies to mitigate inflationary pressures and foster economic resilience.

Suggested Citation

  • A. Akshaya & B. V. Gopalakrishna, 2025. "Impact of climate and economic policy uncertainties on inflation in India: using the vector error correction model approach," Asia-Pacific Journal of Regional Science, Springer, vol. 9(2), pages 585-604, June.
    • Handle: RePEc:spr:apjors:v:9:y:2025:i:2:d:10.1007_s41685-025-00381-x
    DOI: 10.1007/s41685-025-00381-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s41685-025-00381-x
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s41685-025-00381-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

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

    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:spr:apjors:v:9:y:2025:i:2:d:10.1007_s41685-025-00381-x. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.