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Inflation Expectations and Monetary Policy in India: An Empirical Exploration
Author:
Michael Debabrata Patra
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and
Partha Ray
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Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 084
Language:
English
Publication Date:
01 Apr 2010
DOI:
https://doi.org/10.5089/9781451982640.001
ISBN:
9781451982640
ISSN:
1018-5941
Pages:
26
Keywords:
WP; inflation expectation; WPI inflation projection; consumer price; expectations survey; inflation pressure; Inflation; India; Monetary Policy; inflation process; inflation concern; inflation risk; Real interest rates; Wholesale price indexes; Food prices; Consumer price indexes; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper pursues a computationally intensive approach to generate future inflation, followed by an exploration of the determinants of inflation expectations by estimating a new Keynesian type Phillips curve that takes into account country-specific characteristics, the stance of monetary and fiscal policies, marginal costs and exogenous supply shocks. The empirical results indicate that high and climbing inflation could easily seep into people’s anticipation of future inflation and linger. There is a reputational bonus for monetary policy to act against inflation now rather than going for cold turkey when societal compulsions reach a critical mass.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2010: Issue 084