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Assessment of inflationary expectations in India: a Markov chain Monte-Carlo based Gibbs sampling approach

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  • Himanshu Joshi

Abstract

Inflation in India is commonly analyzed in terms of the traditional 'monetarist' and 'structuralist' frameworks. However, these models have not been widely tested for their forecasting ability in practical policy settings. Besides, the important issue of assessment of inflationary expectations is hardly addressed by these models. This paper illustrates an empirical method for high frequency (weekly) forecasting of inflation rate based on mixed estimation and Markov Chain Monte-Carlo led Gibbs sampling procedure and compares the outcomes with respect to those obtained from an analogue classical least squares (CLS) model. Improvement in forecasting performance is observed.

Suggested Citation

  • Himanshu Joshi, 2010. "Assessment of inflationary expectations in India: a Markov chain Monte-Carlo based Gibbs sampling approach," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 3(2), pages 213-225.
    • Handle: RePEc:taf:macfem:v:3:y:2010:i:2:p:213-225
    DOI: 10.1080/17520843.2010.498133
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    References listed on IDEAS

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    1. Mr. Tim Callen & Dongkoo Chang, 1999. "Modeling and Forecasting Inflation in India," IMF Working Papers 1999/119, International Monetary Fund.
    2. Chand, Sheetal K., 1996. "Fiscal and other determinants of the Indian inflation rate," Working Papers 96/7, National Institute of Public Finance and Policy.
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