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Revisiting the empirical existence of the Phillips Curve for India

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

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 Phillipscurve. 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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File URL: http://mpra.ub.uni-muenchen.de/31793/1/MPRA_paper_31793.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31793.

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Date of creation: 09 Feb 2010
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Publication status: Published in Journal of Asian Economics 22.2(2011): pp. 1-20
Handle: RePEc:pra:mprapa:31793
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  1. William Poole, 1970. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Staff Studies 57, Board of Governors of the Federal Reserve System (U.S.).
  2. Laurence M. Ball, 1999. "Policy Rules for Open Economies," NBER Chapters, in: Monetary Policy Rules, pages 127-156 National Bureau of Economic Research, Inc.
  3. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  4. Paul, Biru Paksha, 2009. "In search of the Phillips curve for India," Journal of Asian Economics, Elsevier, vol. 20(4), pages 479-488, September.
  5. Matthew D. Shapiro & David W. Wilcox, 1996. "Mismeasurement in the Consumer Price Index: An Evaluation," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 93-154 National Bureau of Economic Research, Inc.
  6. Singh, Kanhaiya & Kalirajan, Kaliappa, 2003. "The inflation-growth nexus in India: an empirical analysis," Journal of Policy Modeling, Elsevier, vol. 25(4), pages 377-396, June.
  7. Susanto Basu & John G. Fernald, 2009. "What do we know and not know about potential output?," Working Paper Series 2009-05, Federal Reserve Bank of San Francisco.
  8. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  9. Tim Callen & Dongkoo Chang, 1999. "Modeling and Forecasting Inflation in India," IMF Working Papers 99/119, International Monetary Fund.
  10. Ozbek, Levent & Ozlale, Umit, 2005. "Employing the extended Kalman filter in measuring the output gap," Journal of Economic Dynamics and Control, Elsevier, vol. 29(9), pages 1611-1622, September.
  11. Kuttner, Kenneth N, 1994. "Estimating Potential Output as a Latent Variable," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 361-68, July.
  12. Findley, David F, et al, 1998. "New Capabilities and Methods of the X-12-ARIMA Seasonal-Adjustment Program," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 127-52, April.
  13. Frederic S. Mishkin, 2008. "Does Stabilizing Inflation Contribute To Stabilizing Economic Activity?," NBER Working Papers 13970, National Bureau of Economic Research, Inc.
  14. Phillip Arestis & Michelle Baddeley & John S.L. McCombie (ed.), 2007. "Economic Growth," Books, Edward Elgar, number 3958, July.
  15. Srinivasan, Naveen & Jain, Sumit & Ramachandran, M., 2009. "Monetary policy and the behaviour of inflation in India: Is there a need for institutional reform?," Journal of Asian Economics, Elsevier, vol. 20(1), pages 13-24, January.
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