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Insights from Indian households' qualitative inflation expectations

Author

Listed:
  • Roshin Paul P

    (Reserve Bank of India)

  • Toniya Ghosh

    (Indira Gandhi Institute of Development Research)

Abstract

Using the Reserve Bank of India's inflation expectations survey of households (IESH) covering the period 2008 to 2023, we analyze the qualitative inflation expectations (IE) of Indian households at the general and item-wise level. We determine whether they have any forward-looking properties and additionally study the pattern of uncertainties and disagreements associated with households' IE during various economic episodes in India. We find that the households have different opinions on the IE of different items, and they are influenced by various macroeconomic shocks. Additionally, their three-months-ahead overall IE are formed mainly based on their IE on food products, followed by cost of services and non-food products, while their one-year-ahead IE are formed mainly based on the IE of non-food products, followed by cost of services and food products. Moreover, the quantified three-months-ahead IE and one-year-ahead IE when fitted into the hybrid version of the New Keynesian Phillips Curve were found to be statistically significant in predicting inflation. Further, the respondents' demographic characteristics have an impact on their qualitative IE and the uncertainty that comes with it. Lastly, we discovered that the inflation shocks in either direction led to an increase in the disagreements on IE of households.

Suggested Citation

  • Roshin Paul P & Toniya Ghosh, 2025. "Insights from Indian households' qualitative inflation expectations," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2025-001, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2025-001
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2025-001.pdf
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    More about this item

    Keywords

    Cross-Sectional Models; Disagreement; Inflation; Inflation expectations; Survey; Uncertainty;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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