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Searching Threshold Inflation for India

Author

Listed:
  • Prakash Singh

    (Institute of Economic Growth)

Abstract

The present study is an effort to examine econometrically the presence of threshold level of inflation for India, in an environment where expected inflation is in double digit. This upward pressure on inflation is mainly due to rise in food prices; and high investment due to surge in domestic and international demand backed by industrial. High inflation not only costs central bank of the country but, it also affects the output negatively, if it is beyond the tolerable limit. Study uses specification of Sarel (1996) and Khan and Senhadji (2001) to estimate the point of threshold. The estimation result of the study confirms the presence of threshold level of inflation for India at 6 percent inflation rate and thus advocates the view of maintaining inflation rate below 6 percent for the healthy output growth rate in Indian economy. But study fails to confirm the same in Sarel (1996) sense.

Suggested Citation

  • Prakash Singh, 2010. "Searching Threshold Inflation for India," Economics Bulletin, AccessEcon, vol. 30(4), pages 3209-3220.
    • Handle: RePEc:ebl:ecbull:eb-10-00310
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P296.pdf
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    Citations

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    Cited by:

    1. Manamba EPAPHRA, 2016. "Nonlinearities in Inflation and Growth Nexus: The Case of Tanzania," Journal of Economics and Political Economy, KSP Journals, vol. 3(3), pages 471-512, September.
    2. Jaganath Behera & Alok Kumar Mishra, 2017. "The Recent Inflation Crisis and Long-run Economic Growth in India: An Empirical Survey of Threshold Level of Inflation," South Asian Journal of Macroeconomics and Public Finance, , vol. 6(1), pages 105-132, June.
    3. Nawalage S. Cooray, 2013. "An Empirical Analysis of Inflation-Growth Nexus in Developing Countries: The Case of Sri Lanka," Working Papers EMS_2013_21, Research Institute, International University of Japan.
    4. Madhu Sehrawat & A. K. Giri, 2015. "Re-examining the Threshold Effects in Inflation–Growth Nexus: Evidence from India," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(2), pages 57-67, Fabruary.
    5. Abu Bakarr TARAWALIE & Fatima KAMARA, 2022. "Inflation and Growth Nexus: An Estimate of the Threshold Level of Inflation in Sierra Leone," Applied Economics and Finance, Redfame publishing, vol. 9(2), pages 70-78, May.
    6. Raynold Runganga, 2020. "Inflation and Economic Growth in Zimbabwe is there Any Inflation Threshold Level?," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 8(1), pages 1-10.
    7. Kushal Banik Chowdhury & Kaustav Kanti Sarkar & Srikanta Kundu, 2021. "Nonlinear relationships between inflation, output growth and uncertainty in India: New evidence from a bivariate threshold model," Bulletin of Economic Research, Wiley Blackwell, vol. 73(3), pages 469-493, July.
    8. Asaduzzaman, Md, 2021. "Relationship between threshold level of inflation and economic growth in Bangladesh- a multivariate quadratic regression analysis," MPRA Paper 110333, University Library of Munich, Germany, revised 02 Feb 2021.
    9. Kamiar Mohaddes & Mehdi Raissi, 2014. "Does Inflation Slow Long-Run Growth in India?," Cambridge Working Papers in Economics 1440, Faculty of Economics, University of Cambridge.
    10. Bhatta, Siddha Raj, 2015. "Optimal Rate of Inflation in Nepal : An Empirical Investigation," MPRA Paper 96696, University Library of Munich, Germany.

    More about this item

    Keywords

    E31; E52; F36;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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