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Inflation, uncertainty and monetary policy in India: a regime-switching analysis

Author

Listed:
  • Sudhanshu Kumar

    (National Institute of Public Finance and Policy, New Delhi)

Abstract

Based on the characteristics of the inflation data for India, the paper first identifies the possible number of significantly different regimes using Kernel density estimates; and then it estimates a Markov-switching model using the Maximum Likelihood Estimation. Estimated results suggest that high inflation uncertainty in India has not only been a feature of very high levels of inflation but is also associated with the low levels.

Suggested Citation

  • Sudhanshu Kumar, 2015. "Inflation, uncertainty and monetary policy in India: a regime-switching analysis," Economics Bulletin, AccessEcon, vol. 35(4), pages 2213-2219.
    • Handle: RePEc:ebl:ecbull:eb-15-00390
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I4-P223.pdf
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    References listed on IDEAS

    as
    1. Peter N. Ireland, 2009. "On the Welfare Cost of Inflation and the Recent Behavior of Money Demand," American Economic Review, American Economic Association, vol. 99(3), pages 1040-1052, June.
    2. Y V Reddy, 2007. "Glimpses of Indian Economy and its Financial Sector," Working Papers id:1044, eSocialSciences.
    3. Marco Bianchi & Gylfi Zoega, 1998. "Unemployment persistence: does the size of the shock matter?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(3), pages 283-304.
    4. Garcia, Rene & Perron, Pierre, 1996. "An Analysis of the Real Interest Rate under Regime Shifts," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 111-125, February.
    5. Sudhanshu Kumar, 2014. "The varying interest elasticity and the cost of inflation in India," Applied Economics Letters, Taylor & Francis Journals, vol. 21(7), pages 497-500, May.
    6. Cosimano, Thomas F & Jansen, Dennis W, 1988. "Estimates of the Variance of U.S. Inflation Based upon the ARCH Model: A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(3), pages 409-421, August.
    7. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, April.
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    Cited by:

    1. Jaka Sriyana & Jiyao Joanna Ge, 2019. "Asymmetric responses of fiscal policy to the inflation rate in Indonesia," Economics Bulletin, AccessEcon, vol. 39(3), pages 1701-1713.

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    More about this item

    Keywords

    Inflation; Uncertainty; Monetary Policy; Markov-switching; Bootstrap Multimodality test;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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