IDEAS home Printed from https://ideas.repec.org/a/sae/mareco/v1y2007i2p139-166.html
   My bibliography  Save this article

Through a Glass Darkly

Author

Listed:
  • Ashima Goyal

    (Ashima Goyal is Professor, Indira Gandhi Institute of Development Research, Gen Vaidya Marg, Santosh Nagar, Goregaon(E), Mumbai 400065, e-mail: ashima@igidr.ac.in)

  • Arjun Singh

    (Arjun Singh is Business Analyst, Citigroup Global Services Ltd., e-mail: arjunigidr@gmail.com)

Abstract

In order to examine if the impact of oil price shocks depends on the structure of an economy, a vertical (VSC) and a horizontal (HSC) long-run supply curve identifications are successively imposed on a three-variable structural vector autoregression (SVAR) with Indian time series data. While core inflation is measured with the VSC, the HSC requires a new concept of demand-driven inflation: residual (demand) inflation, which gives the impact of short and medium-run demand shocks on inflation. Both core and residual inflation are estimated. The data favours the HSC, but both identifications imply that policy demand squeeze aggravated international oil price shocks.

Suggested Citation

  • Ashima Goyal & Arjun Singh, 2007. "Through a Glass Darkly," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 1(2), pages 139-166, April.
    • Handle: RePEc:sae:mareco:v:1:y:2007:i:2:p:139-166
    DOI: 10.1177/097380100700100201
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/097380100700100201
    Download Restriction: no
    File URL: https://libkey.io/10.1177/097380100700100201?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Alain DeSerres & Alain Guay, 1995. "Selection of the Truncation Lag in Structural VARs (or VECMs) with Long-Run Restrictions," Econometrics 9510001, University Library of Munich, Germany.
    3. Todd E. Clark, 2001. "Comparing measures of core inflation," Economic Review, Federal Reserve Bank of Kansas City, vol. 86(Q II), pages 5-31.
    4. Ashima Goyal & Ayan Kumar Pujari, 2005. "Analyzing Core Inflation in India: A Structural VAR Approach," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(2), pages 76-90, May.
    5. Quah, Danny & Vahey, Shaun P, 1995. "Measuring Core Inflation?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1130-1144, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Ashima Goyal & Sanchit Arora, 2012. "Deriving India's Potential growth from theory and structure," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-018, Indira Gandhi Institute of Development Research, Mumbai, India.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bermingham, Colin, 2006. "How Useful is Core Inflation for Forecasting Headline Inflation?," Research Technical Papers 11/RT/06, Central Bank of Ireland.
    2. Joice John & Abhiman Das & Sanjay Singh, 2016. "An Application of Quah and Vahey’s SVAR Methodology for Estimating Core Inflation in India: A Note," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(1), pages 151-158, June.
    3. Ashima Goyal & Arjun Singh, 2006. "Through a glass darkly: Deciphering the impact of oil price shocks," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2006-012, Indira Gandhi Institute of Development Research, Mumbai, India.
    4. Pierre St-Amant, 1996. "Decomposing U.S. Nominal Interest Rates into Expected Inflation and Ex Ante Real Interest Rates Using Structural VAR Methodology," Macroeconomics 9602004, University Library of Munich, Germany.
    5. Iris Claus, 1997. "A Measure of Underlying Inflation in the United States," Staff Working Papers 97-20, Bank of Canada.
    6. Camba-Mendez, Gonzalo & Rodriguez-Palenzuela, Diego, 2003. "Assessment criteria for output gap estimates," Economic Modelling, Elsevier, vol. 20(3), pages 529-562, May.
    7. Mio, Hitoshi, 2002. "Identifying Aggregate Demand and Aggregate Supply Components of Inflation Rate: A Structural Vector Autoregression Analysis for Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(1), pages 33-56, January.
    8. Badarau-Semenescu, Cristina & Ndiaye, Cheikh Tidiane, 2010. "Politique économique et transmission des chocs dans la zone euro," L'Actualité Economique, Société Canadienne de Science Economique, vol. 86(1), pages 35-77, mars.
    9. Dibooglu, Selahattin & Kutan, Ali M., 2001. "Sources of inflation and output fluctuations in Poland and Hungary: Implications for full membership in the European Union," ZEI Working Papers B 16-2001, University of Bonn, ZEI - Center for European Integration Studies.
    10. Catherine Bruneau & Olivier De Bandt, 1999. "La modélisation Var "structurel" : application à la politique monétaire en France," Économie et Prévision, Programme National Persée, vol. 137(1), pages 67-94.
    11. Durai, S. Raja Sethu & Ramachandran, M., 2007. "Core inflation for India," Journal of Asian Economics, Elsevier, vol. 18(2), pages 365-383, April.
    12. Jushan Bai & Serena Ng, 2004. "A PANIC Attack on Unit Roots and Cointegration," Econometrica, Econometric Society, vol. 72(4), pages 1127-1177, July.
    13. Bermingham, Colin, 2010. "A critical assessment of existing estimates of US core inflation," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 993-1007, December.
    14. Annika Alexius & Mikael Carlsson, 2005. "Measures of Technology and the Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 299-307, May.
    15. Dowd, Kevin & Cotter, John & Loh, Lixia, 2011. "U.S. Core Inflation: A Wavelet Analysis," Macroeconomic Dynamics, Cambridge University Press, vol. 15(4), pages 513-536, September.
    16. Gonzalo, Jesus & Ng, Serena, 2001. "A systematic framework for analyzing the dynamic effects of permanent and transitory shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 25(10), pages 1527-1546, October.
    17. Dupasquier, Chantal & Guay, Alain & St-Amant, Pierre, 1999. "A Survey of Alternative Methodologies for Estimating Potential Output and the Output Gap," Journal of Macroeconomics, Elsevier, vol. 21(3), pages 577-595, July.
    18. Bagliano, Fabio C. & Morana, Claudio, 2003. "Measuring US core inflation: A common trends approach," Journal of Macroeconomics, Elsevier, vol. 25(2), pages 197-212, June.
    19. Imran H. Shah & Ian Corrick & Abdul Saboor, 2018. "How should Central Banks Respond to Non-neutral Inflation Expectations?," Open Economies Review, Springer, vol. 29(2), pages 321-351, April.
    20. Alain DeSerres & Alain Guay & Pierre St-Amant, 1995. "Estimating and Projecting Potential Output Using Structural VAR Methodology," Macroeconomics 9504003, University Library of Munich, Germany.

    More about this item

    Keywords

    JEL Classification: E31; JEL Classification: C32; Oil Shocks; SVAR; Identification Strategies; Developing Economy; Residual Inflation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

    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:sae:mareco:v:1:y:2007:i:2:p:139-166. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: SAGE Publications (email available below). General contact details of provider: http://www.ncaer.org/ .

    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.