Revisiting the empirical existence of the Phillips curve for India

Abstract

This paper revisits the empirical existence of the Phillips curve in the Indian context. To estimate the Phillips curve we need two variables -inflation and the output gap. In the case of India, incorrect measurement of both variables causes much difficulty in estimating the Phillipscurve. We use a non-linear Kalman filter approach to estimate the output gap and find that the Kalman filter estimate captures all the dynamics of the economy. Our results show that after taking supply shocks into consideration, there is clear evidence as to the existence of the Phillips curve in India for recent years.JEL Classification: C32;E31; E50

Monetary Transmission Mechanism in India: A Quarterly Model

“…New Keynesian model (NKM) to assess transmission has been estimated in RBI (2002), and Patra and Kapur (2012) and calibrated in Goyal (2008) and Anand et al (2010). Individual equations of the NKM have also been estimated in a number of papers, with most of them concentrated on the Philips curve [for example, Kapur and Patra (2000), Dua and Gaur (2009), Paul (2009), Patra and Ray (2010, Mazumdar (2011), Singh et al (2011)]. Taylor-type rules have been examined in Mohanty and Klau (2004), Virmani (2004), Srinivasan et al (2008), Takeshi andHamori (2009), Anand et al (2010), Hutchison et al (2010), and Singh (2010) 4 .…”

Money and Inflation in India: Evidence From P‐star Model

“…Recently, Paul (), Singh et al . () and Kapur () attributed these theoretically inconsistent results to unavailability of reliable output gap and supply shock measures. In addition, the estimates of adjusted R‐squared provided at the end of the Table , indicate that the models estimated with alternative real money gap measures have an edge over Philips curve model in explaining inflation.…”

“…More recently, Paul (), Singh et al . () and Mazumder () provided evidence supporting the existence of Philips relationship in India. These studies argued that the use of appropriate measures of inflation and output gap and the accommodation of supply shocks helps in tracing the Phillips curve relationship in India.…”

Phillips Curve Relationship in India: Evidence from State-Level Analysis

“…These include Kapur and Patra (2000), RBI (2002RBI ( , 2004, Dua and Gaur (2009), Paul (2009), Patra and Ray (2010, Singh et al (2011), Mazumder (2011), Patra and Kapur (2012, and Kapur (2013). Srinivasan et al (2006), on the other hand, could not find support for the Phillips curve.…”