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Measurement of Inflation in India: Issues and Associated Challenges for the Conduct of Monetary Policy

Author

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  • Nadhanael G V
  • Sitikantha Pattanaik

Abstract

In India, there is a large divergence between CPI and WPI inflation trends in the past, wide dispersion in inflation across commodity groups within WPI, and significant volatility in headline WPI inflation under the influence of supply shocks, the statistical limitations of prices data have received increasing attention in the policy debates. This paper presents the key issues in the current context, while also explaining how policy analyses relevant for the conduct of monetary policy could yield ambiguous results if inflation data used in such analyses have serious limitations. [Staff Studies].

Suggested Citation

  • Nadhanael G V & Sitikantha Pattanaik, 2010. "Measurement of Inflation in India: Issues and Associated Challenges for the Conduct of Monetary Policy," Working Papers id:2822, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:2822 Note: Institutional Papers
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    File URL: http://www.esocialsciences.org/Download/repecDownload.aspx?fname=Document189201090.2298548.pdf&fcategory=Articles&AId=2822&fref=repec
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    References listed on IDEAS

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    1. Ajay Shah & Ila Patnaik & Rudrani Bhattacharya, 2008. "Early Warnings of Inflation in India," Working Papers id:1682, eSocialSciences.
    2. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
    3. Stephen G. Cecchetti & Kim, 2004. "Inflation Targeting, Price-Path Targeting, and Output Variability," NBER Chapters,in: The Inflation-Targeting Debate, pages 173-200 National Bureau of Economic Research, Inc.
    4. W. Erwin Diewert, 1998. "Index Number Issues in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 47-58, Winter.
    5. Robert J Hill, 2004. "Inflation Measurement for Central Bankers," RBA Annual Conference Volume,in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.
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    Cited by:

    1. Patnaik, Ila & Shah, Ajay & Veronese, Giovanni, 2011. "How to measure inflation in India?," Working Papers 11/83, National Institute of Public Finance and Policy.

    More about this item

    Keywords

    supply shocks; volatality; central bank; reserve bank; RBI; statistical issues; Exchange Rate; REER; financial; economic; Inflation Measurement; Monetary policy; India; CPT; WPI; commodity; prices; data; Inflation;

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