IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/57110.html
   My bibliography  Save this paper

Inflation Dynamics in India: An Analysis

Author

Listed:
  • Nair, Manju S

Abstract

India has exhibited high variability in inflation during the last eight years owing to both internal and external factors. The Global Financial Meltdown, recurrent increase in global oil prices, wage employment programmes, widening current account deficits etc resulted in fluctuations in inflation. These factors have a direct influence on variables like output, money supply, exchange rate which in turn affect inflation. In this context, the study employs a Cointegrated Vector Auto Regression framework to analyse inflation dynamics in India. The determinants identified to affect inflation in India include broad money supply, exchange rate and output, which is substantiated by the existing theories of inflation. There exists a cointegrating relation between inflation and its determinants and in the short run inflation adjusts to past changes and policy fundamentals as inferred from the Error Correction Model. The Impulse Response Function traces out a stable relationship of inflation with its identified determinants.

Suggested Citation

  • Nair, Manju S, 2014. "Inflation Dynamics in India: An Analysis," MPRA Paper 57110, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:57110
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/57110/1/MPRA_paper_57110.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    2. Nachane, Dilip M., 2006. "Econometrics: Theoretical Foundations and Empirical Perspectives," OUP Catalogue, Oxford University Press, number 9780195647907.
    3. I, Sahadudheen, 2012. "A cointegration and error correction approach to the determinants of inflation in India," MPRA Paper 65561, University Library of Munich, Germany, revised 2012.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mohammad Mahabub Alam, 2018. "The Determinants of CPI Inflation in Bangladesh, 1980-2016," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 6(4), pages 441-461, December.
    2. Anuradha Patnaik, 2010. "Study of Inflation in India: A Cointegrated Vector Autoregression Approach," Journal of Quantitative Economics, The Indian Econometric Society, vol. 8(1), pages 118-129, January.
    3. Czujack, Corinna & Flôres Junior, Renato Galvão & Ginsburgh, Victor, 1995. "On long-run price comovements between paintings and prints," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 269, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    4. Lisbeth Funding la Cour, 1995. "A Component® based Analysis of the danish Long-run Money Demand Relation," Discussion Papers 95-18, University of Copenhagen. Department of Economics.
    5. Muhammad Shahbaz & Vassilios G. Papavassiliou & Amine Lahiani & David Roubaud, 2023. "Are we moving towards decarbonisation of the global economy? Lessons from the distant past to the present," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2620-2634, July.
    6. Yap, Wei Yim & Lam, Jasmine S.L., 2006. "Competition dynamics between container ports in East Asia," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(1), pages 35-51, January.
    7. Ely, David & Salehizadeh, Mehdi, 2001. "American depositary receipts: An analysis of international stock price movements," International Review of Financial Analysis, Elsevier, vol. 10(4), pages 343-363.
    8. Candelon, Bertrand & Lieb, Lenard, 2013. "Fiscal policy in good and bad times," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2679-2694.
    9. Abbas Alavirad & Sanhita Athawale, 2005. "The impact of the budget deficit on inflation in the Islamic Republic of Iran," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 29(1), pages 37-49, March.
    10. Paresh Kumar Narayan & Seema Narayan, 2008. "Do Permanent Shocks Explain Income Levels? A Common Cycle–Common Trend Analysis Of Regional Income Levels For China," Pacific Economic Review, Wiley Blackwell, vol. 13(5), pages 656-662, December.
    11. Liu, Yaping & Sadiq, Farah & Ali, Wajahat & Kumail, Tafazal, 2022. "Does tourism development, energy consumption, trade openness and economic growth matters for ecological footprint: Testing the Environmental Kuznets Curve and pollution haven hypothesis for Pakistan," Energy, Elsevier, vol. 245(C).
    12. Luis Eduardo Arango & Carlos Esteban Posada, 2006. "The Time-Varying Long-Run Unemployment Rate: The Colombian Case," Borradores de Economia 389, Banco de la Republica de Colombia.
    13. Juan Carlos Cuestas & Karsten Staehr, 2014. "The great (De)leveraging in the GIIPS countries. Domestic credit and net foreign liabilities 1998–2013," Bank of Estonia Working Papers wp2014-4, Bank of Estonia, revised 10 Oct 2014.
    14. Costola, Michele & Iacopini, Matteo, 2023. "Measuring sovereign bond fragmentation in the Eurozone," Finance Research Letters, Elsevier, vol. 51(C).
    15. Juan de Dios Tena & César Salazar, 2008. "Explaining inflation and output volatility in Chile: an empirical analysis of forty years," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, December.
    16. Ansharullah Tasri, 2019. "The Flypaper Effect Phenomenon: Evidence from Indonesia," European Journal of Engineering and Formal Sciences Articles, Revistia Research and Publishing, vol. 2, 2019.
    17. Grigori Fainstein & Igor Novikov, 2011. "The Comparative Analysis of Credit Risk Determinants In the Banking Sector of the Baltic States," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 20-45, June.
    18. Korczak, Piotr & Phylaktis, Kate, 2010. "Related securities and price discovery: Evidence from NYSE-listed Non-U.S. stocks," Journal of Empirical Finance, Elsevier, vol. 17(4), pages 566-584, September.
    19. Valérie Mignon & Christophe Hurlin, 2007. "Une synthèse des tests de cointégration sur données de panel," Économie et Prévision, Programme National Persée, vol. 180(4), pages 241-265.
    20. Mauricio, Jose Alberto, 2006. "Exact maximum likelihood estimation of partially nonstationary vector ARMA models," Computational Statistics & Data Analysis, Elsevier, vol. 50(12), pages 3644-3662, August.

    More about this item

    Keywords

    Inflation dynamics; co-integration; impulse response;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:pra:mprapa:57110. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.