Pub Date : 2020-04-01DOI: 10.1177/2277978719898974
S. Gnangnon
The implementation of sustainable development goals (SDGs) adopted in 2015 by the international community in the Agenda 2030 requires a substantial mobilization of financial resources. In the meantime, Goal 17 of this Agenda recognizes trade as an important means of the implementation of the SDGs. The current article investigates empirically the impact of openness to international trade on the diversification of external financial flows for development, which could help developing countries achieve the SDGs by 2030. To that end, three major external flows for development have been considered: development aid inflows, migrants’ remittances inflows and foreign direct investment (FDI) inflows. The analysis relies on a panel data set comprising 116 countries, over the period 1970–2017. The empirical analysis relies primarily on the two-step system generalized method of moments (GMM) approach and shows that greater trade openness exerts a positive and significant impact on the diversification of external financial flows for development, in particular, in the least developed countries (LDCs). As a result, greater openness to international trade could be an important tool for external capital flows diversification in developing countries. JEL Classification: F13, F14, F21, F24, F35, O20
{"title":"Trade Openness and Diversification of External Financial Flows for Development: An Empirical Analysis","authors":"S. Gnangnon","doi":"10.1177/2277978719898974","DOIUrl":"https://doi.org/10.1177/2277978719898974","url":null,"abstract":"The implementation of sustainable development goals (SDGs) adopted in 2015 by the international community in the Agenda 2030 requires a substantial mobilization of financial resources. In the meantime, Goal 17 of this Agenda recognizes trade as an important means of the implementation of the SDGs. The current article investigates empirically the impact of openness to international trade on the diversification of external financial flows for development, which could help developing countries achieve the SDGs by 2030. To that end, three major external flows for development have been considered: development aid inflows, migrants’ remittances inflows and foreign direct investment (FDI) inflows. The analysis relies on a panel data set comprising 116 countries, over the period 1970–2017. The empirical analysis relies primarily on the two-step system generalized method of moments (GMM) approach and shows that greater trade openness exerts a positive and significant impact on the diversification of external financial flows for development, in particular, in the least developed countries (LDCs). As a result, greater openness to international trade could be an important tool for external capital flows diversification in developing countries. JEL Classification: F13, F14, F21, F24, F35, O20","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"9 1","pages":"22 - 57"},"PeriodicalIF":0.9,"publicationDate":"2020-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/2277978719898974","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43271969","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-03-19DOI: 10.1177/2277978720906049
M. Boachie, Martin Ruzima, M. Immurana
This article examines the role of financial development and trade openness in promoting private investment in India. We use data (1960– 2013) from the World Development Indicators database. After checking the time series properties of the data, we employ auto-regressive distributed lag (ARDL) estimation technique to investigate the impact of the concurrent existence of financial development and trade openness on private investment and whether the effect of financial development is dependent on the level of openness. The results show that, independently, financial development and trade openness have significant positive effects on India’s private sector investment, in both the long run and the short run. However, the effect of the interaction between financial development and trade openness on private investment is significantly negative, suggesting that the effect of financial development on private investment depends on the level of openness. Therefore, we conclude that care should be taken in the design of policies that allow for the coexistence of financial development and trade openness if India aims at promoting private sector capital formation for job creation. JEL Classification: E22, E44, F10, F60
{"title":"The Concurrent Effect of Financial Development and Trade Openness on Private Investment in India","authors":"M. Boachie, Martin Ruzima, M. Immurana","doi":"10.1177/2277978720906049","DOIUrl":"https://doi.org/10.1177/2277978720906049","url":null,"abstract":"This article examines the role of financial development and trade openness in promoting private investment in India. We use data (1960– 2013) from the World Development Indicators database. After checking the time series properties of the data, we employ auto-regressive distributed lag (ARDL) estimation technique to investigate the impact of the concurrent existence of financial development and trade openness on private investment and whether the effect of financial development is dependent on the level of openness. The results show that, independently, financial development and trade openness have significant positive effects on India’s private sector investment, in both the long run and the short run. However, the effect of the interaction between financial development and trade openness on private investment is significantly negative, suggesting that the effect of financial development on private investment depends on the level of openness. Therefore, we conclude that care should be taken in the design of policies that allow for the coexistence of financial development and trade openness if India aims at promoting private sector capital formation for job creation. JEL Classification: E22, E44, F10, F60","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"9 1","pages":"190 - 220"},"PeriodicalIF":0.9,"publicationDate":"2020-03-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/2277978720906049","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46415963","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-03-02DOI: 10.1177/2277978720906066
Chai-Thing Tan, A. Mohamed, M. Habibullah, Lee Chin
This article analyses the impact of monetary and fiscal policies on economic growth in Malaysia, Singapore and Thailand from 1980:Q1 to 2017:Q1. Autoregressive distributed lag (ARDL) approach is employed to determine the long-run relationship. Further, a range of econometric models, such as fully modified least squares method (FMOLS), canonical cointegration regression (CCR) and dynamic ordinary least squares method (DOLS), are applied to check the robustness. The results are stable and robust as all the models yield consistency result. The main findings in this study demonstrate that: (a) interest rate had a negative impact on economic growth in three selected countries. (b) Government spending had a negative impact on economic growth in Malaysia and Singapore, but had a positive impact in Thailand. (c) Monetary policy is more effective in Malaysia and Singapore, while fiscal policy is more effective in Thailand. JEL Classification: E52, E58, E62, C01
{"title":"The Impacts of Monetary and Fiscal Policies on Economic Growth in Malaysia, Singapore and Thailand","authors":"Chai-Thing Tan, A. Mohamed, M. Habibullah, Lee Chin","doi":"10.1177/2277978720906066","DOIUrl":"https://doi.org/10.1177/2277978720906066","url":null,"abstract":"This article analyses the impact of monetary and fiscal policies on economic growth in Malaysia, Singapore and Thailand from 1980:Q1 to 2017:Q1. Autoregressive distributed lag (ARDL) approach is employed to determine the long-run relationship. Further, a range of econometric models, such as fully modified least squares method (FMOLS), canonical cointegration regression (CCR) and dynamic ordinary least squares method (DOLS), are applied to check the robustness. The results are stable and robust as all the models yield consistency result. The main findings in this study demonstrate that: (a) interest rate had a negative impact on economic growth in three selected countries. (b) Government spending had a negative impact on economic growth in Malaysia and Singapore, but had a positive impact in Thailand. (c) Monetary policy is more effective in Malaysia and Singapore, while fiscal policy is more effective in Thailand. JEL Classification: E52, E58, E62, C01","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"9 1","pages":"114 - 130"},"PeriodicalIF":0.9,"publicationDate":"2020-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/2277978720906066","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47070782","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-02-20DOI: 10.1177/2277978720906068
Biswajit Maitra
While the export-led growth (ELG) hypothesis attracted much attention historically, the import-led growth (ILG) dimension received little attention despite important linkages. The present article studies whether the ELG, ILG, growth-led export (GLE) and growth-led import (GLI) propositions hold in India for the post-reform period. Accordingly, the short-run and the long-run impacts of exports, imports, exchange rate and trade openness on income are assessed. The analysis finds prominent evidence of ILG hypothesis, both in the short run and in the long run suggesting that import is a significant bearing of economic growth, while the ELG hypothesis holds only in the short run. Besides, the exchange rate and trade openness have negative impacts on income. The study also finds indications of significant, stable export- and import-demand functions, where income and trade openness have caused exports and imports to rise. As income causes a rise in both export and import, the GLE and GLI hypotheses are also testified. The exchange rate depreciation and lagged imports also cause the export to a raise. As trade particularly import is an essential factor in income growth, the country should encourage more outer-orientation of the economy. An import liberalization policy could be useful for economic growth. JEL Classification: F43, F13, F14, O24, C32
{"title":"Exploring Import-led Growth in India: Evidence from the Post-reform Period","authors":"Biswajit Maitra","doi":"10.1177/2277978720906068","DOIUrl":"https://doi.org/10.1177/2277978720906068","url":null,"abstract":"While the export-led growth (ELG) hypothesis attracted much attention historically, the import-led growth (ILG) dimension received little attention despite important linkages. The present article studies whether the ELG, ILG, growth-led export (GLE) and growth-led import (GLI) propositions hold in India for the post-reform period. Accordingly, the short-run and the long-run impacts of exports, imports, exchange rate and trade openness on income are assessed. The analysis finds prominent evidence of ILG hypothesis, both in the short run and in the long run suggesting that import is a significant bearing of economic growth, while the ELG hypothesis holds only in the short run. Besides, the exchange rate and trade openness have negative impacts on income. The study also finds indications of significant, stable export- and import-demand functions, where income and trade openness have caused exports and imports to rise. As income causes a rise in both export and import, the GLE and GLI hypotheses are also testified. The exchange rate depreciation and lagged imports also cause the export to a raise. As trade particularly import is an essential factor in income growth, the country should encourage more outer-orientation of the economy. An import liberalization policy could be useful for economic growth. JEL Classification: F43, F13, F14, O24, C32","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"9 1","pages":"113 - 87"},"PeriodicalIF":0.9,"publicationDate":"2020-02-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/2277978720906068","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46474492","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-01-30DOI: 10.1177/2277978719898975
K. Mughal, F. Schneider
We explore the interaction of the informal sector with the formal economy for a developing economy, that is, Pakistan. Estimation results are obtained via autoregressive distributed lag (ARDL) bounds testing approach, which show a significantly positive effect of the informal sector in the long run whereas a negative impact of informal sector is found in the short run. We also present dynamic simulations to show the effect/contribution in terms of revised GDP per capita if the informal sector is accounted for in official statistics. The novelty of results is the varying effects of the informal sector across two time horizons that can have serious policy implications for developing and transition economies with large informal sectors. Although, the findings of this article enrich our understanding on the behaviour of the informal sector, they further fuel the debate associated with eradication of the informal sector. Efforts to curb informal activities may burden the low-skilled workforce in this sector and increase corruption opportunities in bureaucracy in the absence of institutional reforms. On the contrary, it makes the formal sector policy design and implementation a challenging task. JEL Classification: E26, H26, K42, O17
{"title":"How Informal Sector Affects the Formal Economy in Pakistan? A Lesson for Developing Countries","authors":"K. Mughal, F. Schneider","doi":"10.1177/2277978719898975","DOIUrl":"https://doi.org/10.1177/2277978719898975","url":null,"abstract":"We explore the interaction of the informal sector with the formal economy for a developing economy, that is, Pakistan. Estimation results are obtained via autoregressive distributed lag (ARDL) bounds testing approach, which show a significantly positive effect of the informal sector in the long run whereas a negative impact of informal sector is found in the short run. We also present dynamic simulations to show the effect/contribution in terms of revised GDP per capita if the informal sector is accounted for in official statistics. The novelty of results is the varying effects of the informal sector across two time horizons that can have serious policy implications for developing and transition economies with large informal sectors. Although, the findings of this article enrich our understanding on the behaviour of the informal sector, they further fuel the debate associated with eradication of the informal sector. Efforts to curb informal activities may burden the low-skilled workforce in this sector and increase corruption opportunities in bureaucracy in the absence of institutional reforms. On the contrary, it makes the formal sector policy design and implementation a challenging task. JEL Classification: E26, H26, K42, O17","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"9 1","pages":"21 - 7"},"PeriodicalIF":0.9,"publicationDate":"2020-01-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/2277978719898975","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46747071","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-10-09DOI: 10.1177/2277978719861211
Tomoya Suzuki
The Nepal Rastra Bank (NRB) pegs the Nepalese rupee to the Indian rupee, meaning that the NRB effectively transfers control over the country’s monetary policy to India. It is therefore argued that Indian inflation causes Nepalese inflation. This study investigates whether the NRB should have instead floated the Nepalese rupee and targeted inflation. For this purpose, a dynamic stochastic general equilibrium (DSGE) model under a fixed exchange rate regime is estimated using Nepalese data during the 1993–2016 period. The estimated model is used for simulations under counterfactual scenarios for which the NRB floated the Nepalese rupee and followed a rule to target inflation during the study period. Findings show that inflation targeting would have significantly increased the welfare cost associated with business cycles to risk-averse household, owing to interest-rate volatility. The volatilities of consumption and labour services would have become larger. JEL Classification: E31, E32, E52, F41, F45
{"title":"Counterfactual Inflation Targeting in Nepal","authors":"Tomoya Suzuki","doi":"10.1177/2277978719861211","DOIUrl":"https://doi.org/10.1177/2277978719861211","url":null,"abstract":"The Nepal Rastra Bank (NRB) pegs the Nepalese rupee to the Indian rupee, meaning that the NRB effectively transfers control over the country’s monetary policy to India. It is therefore argued that Indian inflation causes Nepalese inflation. This study investigates whether the NRB should have instead floated the Nepalese rupee and targeted inflation. For this purpose, a dynamic stochastic general equilibrium (DSGE) model under a fixed exchange rate regime is estimated using Nepalese data during the 1993–2016 period. The estimated model is used for simulations under counterfactual scenarios for which the NRB floated the Nepalese rupee and followed a rule to target inflation during the study period. Findings show that inflation targeting would have significantly increased the welfare cost associated with business cycles to risk-averse household, owing to interest-rate volatility. The volatilities of consumption and labour services would have become larger. JEL Classification: E31, E32, E52, F41, F45","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"8 1","pages":"117 - 97"},"PeriodicalIF":0.9,"publicationDate":"2019-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/2277978719861211","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45504643","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-10-03DOI: 10.1177/2277978719870885
S. Mitra
The article explains how ‘nudge theory’ can be applied to alleviate the incidence of terrorism. Nudges, which bring about a change in the environment in which individual choice is exercised, do not just modify the behaviour of individuals in a society but thereby influence the social environment which impacts both the human brain and behaviour. Thus, a nudge when appropriately administered to a large number of individuals can potentially bring about social evolution. This article seeks to reap dividends from this analytical argument by setting up an axiomatic system which captures present-day individual and social behaviour and then elaborates on the resultant social dynamics, which lead to growth of terrorism inducing intercommunity hatred. As humans can evolve, any axioms about human and social behaviour are not timeless. The article therefore suggests nudges for utilizing the bidirectional causality between the human brain and social environment to render one or more axioms toothless and diminish the societal propensity for terrorism. The recommended nudges include those that promote formation of mixed neighbourhoods by discreetly inducing more frequent interactions of a positive nature between members of hitherto hostile socio-economic groups; cultural exchange on neutral ground; and corporate social responsibility fostering the wellbeing of poor communities. JEL Classification: B55, D74, D87
{"title":"Controlling Terrorism Through the Nudging of Social Interactions","authors":"S. Mitra","doi":"10.1177/2277978719870885","DOIUrl":"https://doi.org/10.1177/2277978719870885","url":null,"abstract":"The article explains how ‘nudge theory’ can be applied to alleviate the incidence of terrorism. Nudges, which bring about a change in the environment in which individual choice is exercised, do not just modify the behaviour of individuals in a society but thereby influence the social environment which impacts both the human brain and behaviour. Thus, a nudge when appropriately administered to a large number of individuals can potentially bring about social evolution. This article seeks to reap dividends from this analytical argument by setting up an axiomatic system which captures present-day individual and social behaviour and then elaborates on the resultant social dynamics, which lead to growth of terrorism inducing intercommunity hatred. As humans can evolve, any axioms about human and social behaviour are not timeless. The article therefore suggests nudges for utilizing the bidirectional causality between the human brain and social environment to render one or more axioms toothless and diminish the societal propensity for terrorism. The recommended nudges include those that promote formation of mixed neighbourhoods by discreetly inducing more frequent interactions of a positive nature between members of hitherto hostile socio-economic groups; cultural exchange on neutral ground; and corporate social responsibility fostering the wellbeing of poor communities. JEL Classification: B55, D74, D87","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"8 1","pages":"180 - 190"},"PeriodicalIF":0.9,"publicationDate":"2019-10-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/2277978719870885","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41386918","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-09-22DOI: 10.1177/2277978719861212
Subhasankar Chattopadhyay
The withdrawal of high-denomination paper money in India—popularly termed ‘demonetization’—has generated interest among common people to understand what the usual macroeconomic consequences of such one-time monetary shock are. This article conjectures (a) that such unanticipated supply-side replacement of paper money of higher denominations may lead to a currency ‘trap’ in the short run and a permanent increase in the hoarding of lower denomination currencies in the long run and (b) that the effect on the GDP in the medium run can be ambiguous in a simple IS-LM framework once the effects of variable price level and changing inflation expectations are captured through the presence of an informal sector. JEL Classification: E 12, E 26, E 44, E 52
{"title":"The Macroeconomics of Demonetization: Theory and Some Conjectures","authors":"Subhasankar Chattopadhyay","doi":"10.1177/2277978719861212","DOIUrl":"https://doi.org/10.1177/2277978719861212","url":null,"abstract":"The withdrawal of high-denomination paper money in India—popularly termed ‘demonetization’—has generated interest among common people to understand what the usual macroeconomic consequences of such one-time monetary shock are. This article conjectures (a) that such unanticipated supply-side replacement of paper money of higher denominations may lead to a currency ‘trap’ in the short run and a permanent increase in the hoarding of lower denomination currencies in the long run and (b) that the effect on the GDP in the medium run can be ambiguous in a simple IS-LM framework once the effects of variable price level and changing inflation expectations are captured through the presence of an informal sector. JEL Classification: E 12, E 26, E 44, E 52","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"8 1","pages":"118 - 143"},"PeriodicalIF":0.9,"publicationDate":"2019-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/2277978719861212","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43712023","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-09-22DOI: 10.1177/2277978719872338
F. Schneider
Saumen Chattopadhyay, Macroeconomic of the Black Economy, Delhi, India: Orient Blackswan Publisher, 2018, ₹666, 276 pp. (hardcover). ISBN: 978-93-5287-281-7.
{"title":"Book review: Saumen Chattopadhyay, Macroeconomic of the Black Economy","authors":"F. Schneider","doi":"10.1177/2277978719872338","DOIUrl":"https://doi.org/10.1177/2277978719872338","url":null,"abstract":"Saumen Chattopadhyay, Macroeconomic of the Black Economy, Delhi, India: Orient Blackswan Publisher, 2018, ₹666, 276 pp. (hardcover). ISBN: 978-93-5287-281-7.","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"8 1","pages":"191 - 192"},"PeriodicalIF":0.9,"publicationDate":"2019-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/2277978719872338","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44917189","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-08-28DOI: 10.1177/2277978719861186
Bhavesh Salunkhe, Anuradha Patnaik
The present study estimates various specifications of the New Keynesian Phillips Curve (NKPC) models for India over 1996Q2 to 2017Q2 using Consumer Price Index (CPI) and Wholesale Price Index (WPI) inflation, separately. The empirical results suggest that the data support all the specifications of the Phillips curve models based on both the CPI and WPI inflations. However, the backward looking and hybrid models provide robust results for both the inflation indices. While the forward-looking behaviour dominates the CPI inflation trajectory, the backward-looking behaviour greatly influences the trajectory of WPI inflation. Also, a small-to-moderate degree of persistence is evident in both the CPI and WPI inflation. The output gap, which mainly represents the demand side pressures, turns up the major force determining both the CPI and WPI inflations. Besides the output gap, real effective exchange rate (reer), international crude oil price inflation, global non-fuel commodity price inflation and rainfall have a modest impact on the CPI and WPI inflations. JEL Classification: E12, E52, C36, C14
{"title":"Inflation Dynamics and Monetary Policy in India: A New Keynesian Phillips Curve Perspective","authors":"Bhavesh Salunkhe, Anuradha Patnaik","doi":"10.1177/2277978719861186","DOIUrl":"https://doi.org/10.1177/2277978719861186","url":null,"abstract":"The present study estimates various specifications of the New Keynesian Phillips Curve (NKPC) models for India over 1996Q2 to 2017Q2 using Consumer Price Index (CPI) and Wholesale Price Index (WPI) inflation, separately. The empirical results suggest that the data support all the specifications of the Phillips curve models based on both the CPI and WPI inflations. However, the backward looking and hybrid models provide robust results for both the inflation indices. While the forward-looking behaviour dominates the CPI inflation trajectory, the backward-looking behaviour greatly influences the trajectory of WPI inflation. Also, a small-to-moderate degree of persistence is evident in both the CPI and WPI inflation. The output gap, which mainly represents the demand side pressures, turns up the major force determining both the CPI and WPI inflations. Besides the output gap, real effective exchange rate (reer), international crude oil price inflation, global non-fuel commodity price inflation and rainfall have a modest impact on the CPI and WPI inflations. JEL Classification: E12, E52, C36, C14","PeriodicalId":40308,"journal":{"name":"South Asian Journal of Macroeconomics and Public Finance","volume":"8 1","pages":"144 - 179"},"PeriodicalIF":0.9,"publicationDate":"2019-08-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1177/2277978719861186","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41694565","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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