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Asia and Pacific > India

You are looking at 1 - 10 of 13 items for :

  • Type: Journal Issue x
  • Agriculture: Aggregate Supply and Demand Analysis; Prices x
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Cover IMF Working Papers
Global Value Chain and Inflation Dynamics
Vu Chau
,
Marina Conesa Martinez
,
Taehoon Kim
, and
John A Spray
We study the inflationary impacts of pandemic lockdown shocks and fiscal and monetary stimulus during 2020-2022 using a novel harmonized dataset of sectoral producer price inflation and input-output linkages for more than 1000 sectors in 53 countries. The inflationary impact of shocks is identified via a Bartik shift-share design, where shares reflect the heterogeneous sectoral exposure to shocks and are derived from a macroeconomic model of international production network. We find that pandemic lockdowns, and subsequent reopening policies, were the most dominant driver of global inflation in this period, especially through their impact on aggregate demand. We provide a decomposition of lockdown shock by sources, and find that between 20-30 percent of the demand effect of lockdown/reopening is due to spillover from abroad. Finally, while fiscal and monetary policies played an important role in preventing deflation in 2020, their effects diminished in the recovery years.
Keywords:
Inflation; global value chains; network; pandemic; spillovers; inflation dynamics; lockdown shock; producer price inflation; reopening policy; PPI inflation; Supply shocks; Fiscal stimulus; COVID-19; Global; Asia and Pacific; North America; Northern Europe
Cover IMF Working Papers
India’s Inflation Process Before and After Flexible Inflation Targeting
Patrick Blagrave
and
Weicheng Lian
We study the inflation process in India, focusing on the periods before and after the adoption of flexible inflation-forecast targeting (FIT) in India. Our analysis uses several approaches including standard Phillips curve estimation for headline and core inflation, an examination of the sensitivity of medium-term inflation expectations to inflation surprises, and the properties of convergence between headline and core inflation. Results indicate an important role for domestic factors in driving the inflation process, and there is evidence that expectations have become more anchored since 2015. This result could be attributable to FIT adoption, or to persistently low food prices which dominate the post-FIT-adoption period. The policy implications of these structural changes in the inflation process are investigated using a semi-structural model calibrated to the Indian economy.
Keywords:
India; WP; inflation expectation; headline inflation processes; food price inflation; core-inflation process; core-inflation determinant; headline inflation forecast; Inflation targeting; Inflation; Food prices; Emerging and frontier financial markets; Import prices; Global
Cover IMF Working Papers
Inflation Co-Movement in Emerging and Developing Asia: The Monsoon Effect
Patrick Blagrave
Co-movement (synchronicity) in inflation rates among a set of 13 emerging and developing countries in Asia is shown to be strongest for the food component, partly due to common rainfall shocks—a result which the paper terms the ‘monsoon effect.’ Economies with higher trade integration and co-movement in nominal effective exchange rates also experience greater food-inflation co-movement. By contrast, cross-country co-movement in core inflation is weak and the aforementioned determinants have little explanatory power, suggesting a prominent role for idiosyncratic domestic factors in driving core inflation. In the context of the growing literature on the globalization of inflation, these results suggest that common weather patterns are partly responsible for any role played by a so-called ‘global factor’ among inflation rates in emerging and developing economies, in Asia at least.
Keywords:
WP; moving average; Core CPI Inflation; dependent variable; Inflation; spillovers; co-movement; weather; headline inflation inflation rate; core CPI Inflation co-movement; movement regression; food inflation; core inflation process; inflation outcome; Trade integration; Nominal effective exchange rate; Food prices; Asia and Pacific; Global; monsoon effect; food Inflation co-movement regression; copyright page; robustness check; food Inflation co-movement
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
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
What is Responsible for India’s Sharp Disinflation?
Sajjid Chinoy
,
Pankaj Kumar
, and
Ms. Prachi Mishra
We analyze the dramatic decline in India’s inflation over the last two years using an augmented Phillips Curve approach and quantify the role of different factors. Our results suggest that, contrary to popular perception, the direct role of lower oil prices in India’s disinflation was relatively modest given the limited pass-through into domestic prices. Instead, we find that inflation is a highly persistent process in India, reflecting very adaptive expectations and the backward looking nature of wage and support price-setting. As a consequence, we find that a moderation of expectations, both backward and forward, and a rationalization of Minimum Support Prices (MSPs), explain the bulk of the disinflation over the last two years.
Keywords:
WP; CPI inflation; inflation expectation; Dis-inflation dynamics; food inflation; inflation process; inflation; India; world food price growth; inflation lag; Food prices; Disinflation; Wages; Price indexes; Global
Cover Taming Indian Inflation
Taming Indian Inflation
Mr. Paul Cashin
and
Rahul Anand

Abstract

High and persistent inflation has presented serious macroeconomic challenges in India in recent years, increasing the country’s domestic and external vulnerabilities. A number of factors underpin India’s high inflation. This book analyzes various facets of Indian inflation—the causes, consequences, and policies being implemented to manage it. Several chapters are devoted to analyzing and managing food inflation, given its significance in driving overall inflation dynamics in India.

Keywords:
BOOK; food inflation; lending rate; nonfood inflation; inflation expectation; deposit rate; Inflation; Food prices; Agricultural commodities; Consumer price indexes; Income inequality; Global; South Asia; Asia and Pacific
Cover IMF Working Papers
Understanding India’s Food Inflation: The Role of Demand and Supply Factors
Rahul Anand
,
Naresh Kumar
, and
Mr. Volodymyr Tulin
Over the past decade, India has seen a prolonged period of high inflation, to a large extent driven by persistently-high food inflation. This paper investigates the demand and supply factors behind the contribution of relative food inflation to headline CPI inflation. It concludes that in the absence of a stronger food supply growth response, food inflation may exceed non-food inflation by 2½–3 percentage points per year. The sustainability of a long-term inflation target of 4 percent under India’s recently-adopted flexible inflation targeting framework will depend on enhancing food supply, agricultural market-based pricing, and reducing price distortions. A well-designed cereal buffer stock liquidation policy could also help mitigate food inflation volatility.
Keywords:
WP; food inflation; buffer stock; consumer demand; food price; cereal buffer stocks; monetary policy; India; inflation dynamics; food expenditure; aggregate food demand equation; expenditure elasticity; liquidation policy; commodity price; food category; food inflation volatility; consumer food demand pattern; food demand pressure; Inflation; Agricultural commodities; Food prices; Total expenditures; Global
Cover IMF Working Papers
Inflation and Income Inequality: Is Food Inflation Different?
Mr. James P Walsh
and
Jiangyan Yu
There is an extensive literature noting that high inflation can add to income inequality, and a parallel literature assessing the effect of rising food prices on the poor. This paper attempts to combine these strands by dividing inflation into food and nonfood inflation and assessing whether food inflation affects income inequality differently from nonfood inflation. In an international sample and a sample of Chinese provinces, nonfood inflation exacerbates income inequality while the role of food inflation is more mixed. In a sample of Indian states broken down into urban and rural areas, we find that nonfood inflation adds to income inequality in both areas, while food inflation has a neutral to positive effect on income inequality in rural areas, providing support for the theory that rural wages may respond elastically to food prices.
Keywords:
WP; food inflation; income; inflation; core inflation; commodity prices; food prices; India; China; income distribution; income inequality; inequality data; headline inflation; nonfood inflation; per capita income; incomes of the poor; Personal income; 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