IDEAS home Printed from https://ideas.repec.org/a/dse/indecr/v37y2002i1p91-116.html
   My bibliography  Save this article

A Markov Chain Model of Inflation in India

Author

Listed:
  • Vijayamohanan Pillai N

    (Centre for Development Studies, Prasanth Nagar, Ulloor, Trivandrum-695 011, Kerala, India)

Abstract

In this paper, we advance a Markov chain model for price movements in India, based on the general as well as a selected set of sectional wholesale price indices and on the three consumer price indices for 240 months from April 1981 to March 2001. The estimation period has been divided into two, viz., pre-liberalisation and post-liberalisation, of 10 years each. We consider 3 general states of monthly price changes-positive (tentatively suggesting inflation), negative (deflation), and zero (stable prices), and estimate the state transition probabilities and the steady state probabilities along with the return periods of these three states of price level changes. It is found that in general the state of inflation persists with a high probability and a much shorter return period in India. This indicates that price rises have been cumulative and hence inflationary in effect.

Suggested Citation

  • Vijayamohanan Pillai N, 2002. "A Markov Chain Model of Inflation in India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 37(1), pages 91-116, January.
    • Handle: RePEc:dse:indecr:v:37:y:2002:i:1:p:91-116
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pillai N., Vijayamohanan, 2008. "Infrastructure, Growth And Human Development In Kerala," MPRA Paper 7017, University Library of Munich, Germany.
    2. N. Vijayamohanan Pillai, 2004. "Causality and error correction in Markov chain: Inflation in India revisited," Centre for Development Studies, Trivendrum Working Papers 366, Centre for Development Studies, Trivendrum, India.

    More about this item

    Keywords

    India; Inflation; Markov chains; State transition Probability; Steady state probability; Return Period;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

    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:dse:indecr:v:37:y:2002:i:1:p:91-116. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Pami Dua (email available below). General contact details of provider: https://edirc.repec.org/data/deudein.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.