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Asia and Pacific > India

You are looking at 1 - 10 of 20 items for :

  • Type: Journal Issue x
  • Production; Economic theory x
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Cover Advancing the Frontiers of Monetary Policy
Advancing the Frontiers of Monetary Policy
Mr. Tobias Adrian
,
Mr. Douglas Laxton
, and
Mr. Maurice Obstfeld

Abstract

Contributors working at the International Monetary Fund present 14 chapters on the development of monetary policy over the past quarter century through the lens of the evolution of inflation-forecast targeting. They describe the principles and practices of inflation-forecast targeting, including managing expectations, the implementation of a forecasting and policy analysis system, monetary operations, monetary policy and financial stability, financial conditions, and transparency and communications; aspects of inflation-forecast targeting in Canada, the Czech Republic, India, and the US; and monetary policy challenges faced by low-income countries and how inflation-forecast targeting can provide an anchor in countries with different economic structures and circumstances.

Keywords:
BOOK; central bank; monetary policy; inflation expectation; quantitative easing; monetary policy committee; transmission mechanism; inflation rate; Inflation; Inflation targeting; Central bank policy rate; Output gap; Real interest rates; Global; Sub-Saharan Africa; Africa; monetary policy report
Cover IMF Working Papers
Inflation-Forecast Targeting for India: An Outline of the Analytical Framework
Mr. Jaromir Benes
,
Kevin Clinton
,
Asish George
,
Joice John
,
Mr. Ondrej Kamenik
,
Mr. Douglas Laxton
,
Pratik Mitra
,
G.V. Nadhanael
,
Hou Wang
, and
Fan Zhang
India formally adopted flexible inflation targeting (FIT) in June 2016 to place price stability, defined in terms of a target CPI inflation, as the primary objective of monetary policy. In this context, the paper draws on Indian macroeconomic developments since 2000 and the experience of other countries that adopted FIT to bring out insights on how credible policy with an emphasis on a strong nominal anchor can reduce the impact of supply shocks and improve macroeconomic stability. For illustrating the key issues given the unique structural characteristics of India and the policy options under an FIT framework, the paper describes an analytical framework using the core quarterly projection model (QPM). Simulations of the QPM are carried out to illustrate the monetary policy responses under different types of uncertainty and to bring out the importance of gaining credibility for improving monetary policy efficacy.
Keywords:
WP; monetary policy; interest rate; central bank; exchange rate; inflation targeting; Reserve Bank of India; inflation episodes in India; forecasting models; monetary policy models; model calibration; monetary policy rules; monetary policy simulations; inflation expectation; output-inflation trade-off; transmission mechanism; inflation process; asset price inflation; inflation outcome; food inflation; inflation spiral; inflation condition; monetary policy credibility; inflation glide path; a number of monetary policy instrument; Inflation; Central bank policy rate; Output gap; Supply shocks; Global
Cover IMF Working Papers
Quarterly Projection Model for India: Key Elements and Properties
Mr. Jaromir Benes
,
Kevin Clinton
,
Asish George
,
Pranav Gupta
,
Joice John
,
Mr. Ondrej Kamenik
,
Mr. Douglas Laxton
,
Pratik Mitra
,
G.V. Nadhanael
,
Mr. Rafael A Portillo
,
Hou Wang
, and
Fan Zhang
This paper outlines the key features of the production version of the quarterly projection model (QPM), which is a forward-looking open-economy gap model, calibrated to represent the Indian case, for generating forecasts and risk assessment as well as conducting policy analysis. QPM incorporates several India-specific features like the importance of the agricultural sector and food prices in the inflation process; features of monetary policy transmission and implications of an endogenous credibility process for monetary policy formulation. The paper also describes key properties and historical decompositions of some important macroeconomic variables.
Keywords:
WP; core inflation; interest rate; monetary policy; inflation targeting; Reserve Bank of India; inflation episodes in India; forecasting models; monetary policy models; model calibration; monetary policy rules; monetary policy simulations; food inflation; inflation expectation; reaction function; inflation target; transmission mechanism; Inflation; Output gap; Central bank policy rate; Food prices; Global
Cover IMF Working Papers
Does Inflation Slow Long-Run Growth in India?
Mr. Kamiar Mohaddes
and
Mr. Mehdi Raissi
This paper examines the long-run relationship between consumer price index industrial workers (CPI-IW) inflation and GDP growth in India. We collect data on a sample of 14 Indian states over the period 1989–2013, and use the cross-sectionally augmented distributed lag (CSDL) approach of Chudik et al. (2013) as well as the standard panel ARDL method for estimation—to account for cross-state heterogeneity and dependence, dynamics and feedback effects. Our findings suggest that, on average, there is a negative long-run relationship between inflation and economic growth in India. We also find statistically-significant inflation-growth threshold effects in the case of states with persistently-elevated inflation rates of above 5.5 percent. This suggest the need for the Reserve Bank of India to balance the short-term growthinflation trade-off, in light of the long-term negative effects on growth of persistently-high inflation.
Keywords:
WP; India; inflation; growth; threshold effects; cross-sectional heterogeneity; dependence; data from the CEIC database; panel ARDL approach; inflation threshold effect; CS-DL estimation strategy; growth rate; CPI-RL data; inflation-growth trade-off; CS-DL result; ARDL specification; anti-inflation effort; CS-DL estimate; Consumer price indexes; Production growth; Threshold analysis
Cover IMF Working Papers
Food Inflation in India: The Role for Monetary Policy
Rahul Anand
,
Ding Ding
, and
Mr. Volodymyr Tulin
Indian food and fuel inflation has remained high for several years, and second-round effects on core inflation are estimated to be large. This paper estimates the size of second-round effects using an estimated reduced-form general equilibrium model of the Indian economy, which incorporates pass-through from headline inflation to core inflation. The results indicate that India's inflation is highly inertial and persistent. Due to second-round effects, the gap between headline inflation and core inflation decreases by about three fourths within one year as core inflation catches up with headline inflation. Large second-round effects stem from several factors, such as the high share of food in household expenditure and the role of food inflation in informing inflation expectations and wage setting. Analysis suggests that in order to durably reduce the current high inflation, the monetary policy stance needs to remain tight for a considerable length of time. In addition, progress on structural reforms to raise potential growth is critical to reduce the burden on monetary policy.
Keywords:
WP; interest rate; Monetary policy; forecasting; food inflation; India; inflation expectation; inflation dynamics; fuel inflation pass-through; headline CPI inflation equation; Inflation; Output gap; Real exchange rates; Real interest rates; Commodity price shocks; Global
Cover IMF Working Papers
Growth: Now and Forever?
Giang Ho
and
Mr. Paolo Mauro
Forecasters often predict continued rapid economic growth into the medium and long term for countries that have recently experienced strong growth. Using long-term forecasts of economic growth from the IMF/World Bank staff Debt Sustainability Analyses for a panel of countries, we show that the baseline forecasts are more optimistic than warranted by past international growth experience. Further, by comparing the IMF’s World Economic Outlook forecasts with actual growth outcomes, we show that optimism bias is greater the longer the forecast horizon.
Keywords:
WP; economic growth; country; growth rate; economic growth forecast; growth forecast; optimism bias; forecast horizon; debt sustainability analysis; World Bank DSA exercise; IMF engagement status; teams' baseline forecast; per capita income; IMF definition; standard deviation; Personal income; Output gap; Western Hemisphere; Sub-Saharan Africa; Global
Cover IMF Working Papers
The Investment Technology of Foreign and Domestic Institutional Investors in an Emerging Market
Ila Patnaik
and
Ajay Shah
The literature on the investment technology of foreign versus domestic investors has inconclusive results. This paper revisits the question, with a focus on decomposing portfolio performance into asset allocation and security selection. We document signicant differences in exposure to systematic asset pricing factors between foreign and domestic investors. A quasi-experimental strategy is introduced, for comparing security selection after controlling for diferences in asset allocation. Our results show that foreign investors in India do remarkably poorly at security selection.
Keywords:
WP; DII investment; DII ownership; firm beta; R&D company; chosen firm; firm characteristic; Institutional Investor; Foreign Investors; Domestic Institutional Investors; bottom quintile company; Asset allocation; Productivity; Asset prices; Stock markets; Production growth; Global
Cover IMF Working Papers
The Future of Oil: Geology Versus Technology
Ms. Marcelle Chauvet
,
Mr. Jack G. Selody
,
Mr. Douglas Laxton
,
Mr. Michael Kumhof
,
Mr. Jaromir Benes
,
Mr. Ondrej Kamenik
, and
Susanna Mursula
We discuss and reconcile two diametrically opposed views concerning the future of world oil production and prices. The geological view expects that physical constraints will dominate the future evolution of oil output and prices. It is supported by the fact that world oil production has plateaued since 2005 despite historically high prices, and that spare capacity has been near historic lows. The technological view of oil expects that higher oil prices must eventually have a decisive effect on oil output, by encouraging technological solutions. It is supported by the fact that high prices have, since 2003, led to upward revisions in production forecasts based on a purely geological view. We present a nonlinear econometric model of the world oil market that encompasses both views. The model performs far better than existing empirical models in forecasting oil prices and oil output out of sample. Its point forecast is for a near doubling of the real price of oil over the coming decade. The error bands are wide, and reflect sharply differing judgments on ultimately recoverable reserves, and on future price elasticities of oil demand and supply.
Keywords:
WP; oil price; supply shock; Oil prices; exhaustible resources; fossil fuels; oil depletion; Hubbert’s Peak; Bayesian econometrics; price elasticity; price mechanism; elasticities of demand and supply; cost share; price effect; price channel; long-run price elasticities of oil demand and supply; adjustment cost; share of energy; oil price growth rate; price elasticities of oil demand and supply; price elasticities of demand and supply; Oil; Oil production; Output gap; Inflation; Global
Cover IMF Working Papers
Alternative Monetary Policy Rules for India
Muneesh Kapur
and
Michael Debabrata Patra
This paper empirically evaluates the operational performance of the McCallum rule, the Taylor rule and hybrid rules in India over the period 1996-2011 using quarterly data, with a view to analytically informing the conduct of monetary policy. The results show that forward-looking formulations of both rules and their hybrid version - setting a nominal output growth objective for monetary policy with an interest rate instrument - outperform contemporaneous and backward-looking specifications, especially when targeting core components of GDP and inflation, and combine the best parts of efficiency and discretion.
Keywords:
WP; central bank; policy instrument; reverse repo; India; McCallum Rule; Monetary Policy; Monetary Policy Reaction Function; Neutral Interest Rate; Taylor Rule; policy rule; reaction function; principle result; real rate of interest; WPI inflation; rate of growth; inflation gap; Inflation; Central bank policy rate; Monetary base; Output gap; Personal income; Global
Cover IMF Working Papers
J-Curve of Productivity and Growth: Indian Manufacturing Post-Liberalization
Mr. Arvind Virmani
and
Mr. Danish A Hashim
Most estimates of Indian manufacturing productivity find a slowdown in the 1990s. This has puzzled analysts, given that 1990s reforms were deeper and wider than the 1980s reforms that raised the growth rate of the Indian economy by 2 per cent points. This paper tests the hypothesis of the J curve of Productivity and Growth following major liberalization and finds it to be broadly supported by the data: Technological obsolescence, gradual adoption of new technology and learning by doing result in negative effects on measured productivity.
Keywords:
WP; productivity growth; capital goods; capital stock; fixed capital; output growth; petroleum refinery; private sector; technology-productivity incentive; Indian manufacturing; Economic reforms; productivity & output growth; J-curve hypothesis; petroleum refinery industry; industry composition; productivity differential; productivity spurt; aggregate manufacturing; productivity slowdown; plastic product; productivity-enhancing effect; services productivity; cotton textiles consumer products; petroleum product; Productivity; Production growth; Manufacturing; Total factor productivity; Global