Does Inflation Targeting Anchor Inflation Expectations? Evidence from India

Asnani, S and Kumar, P and Tomar, S (2019) Does Inflation Targeting Anchor Inflation Expectations? Evidence from India. Working Paper. The Indian Statistical Institute.

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We use a novel survey data on inflation expectations of households to evaluate the role of inflation targeting (IT) regime in achieving anchored inflation expectations. The novelty of the data is that it is available both before and after the adoption of IT by India in 2015 and allows the comparison of inflation expectations between these two periods. We find evidence of anchored inflation expectations in every component of the consumer price inflation, headline, food and non-food, only during the IT period. More importantly, there is a muted spillover from food inflation to both food and non-food inflation expectations in the IT period. The lack of spillover from food inflation, which remained equally volatile in both the periods, explains the anchored expectations and improved inflation performance under the IT regime in India.

Item Type: Monograph (Working Paper)
Subjects: Economics
Date Deposited: 03 Sep 2023 10:39
Last Modified: 03 Sep 2023 10:39

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