Modelling Inflation Rate Uncertainty in India: An Empirical Study

Abstract

In recent years, the concept of volatility has gained much importance in macroeconomic variables like stock market indices, exchange rates and price indices. In this study, inflation indicators like the Consumer Price Index Combined (CPI-C) and Wholesale Price Index? all commodities (WPI-AC) starting in 2014:01 and ending in 2023:04 in India are used to measure the inflation uncertainty. To show volatility both symmetric and asymmetric models which are GARCH type are employed. So, that an appropriate forecasting model could be projected. For CPI an asymmetric GARCH model is found appropriate while for WPI a symmetric GARCH model was shown appropriate in the analysis. The volatility of CPI is less than WPI as shown by the various variance tools applied in the paper.