Testing for the Effectiveness of Inflation Targeting in India: A Factor Augmented Vector Autoregression (FAVAR) Approach

Jithin, P; Suresh, Babu M

doi:10.2478/jcbtp-2020-0042

Cited by 4 publications

(3 citation statements)

References 28 publications

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“…Response of all data series to macroeconomic perturbations. From the view of empirical effect, the FAVAR model's empirical effect is better than the VAR model [27][28] ; from the view of the application, the use of the FAVAR model is mainly concentrated in the analysis of inflation and monetary policy [29][30] but also can be used to study the response of prices to macroeconomic shocks and assess the impact of monetary policy on prices in different sectors [31].…”

Section: Favar Modelmentioning

confidence: 99%

The Impact of International Coal Prices on China's Macroeconomy in The Context of "Double Carbon"

Yin

2024

Proceedings of the 5th Management Science Informatization and Economic Innovation Development Conference, MSIEID 2023, December

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Fossil energy is a bulk commodity that human beings rely on for survival and plays a pivotal role in a country's production, consumption, trade, and economic security.This paper analyzes the theoretical mechanism of international coal price on four aspects: economic growth, price level, consumer and investor expectations, and employment level; then constructs the FAVAR model based on 30 major economic indicators in China from 2001 to 2022 and uses impulse response to measure the direction and degree of response of each variable in the face of the international coal price shock, and finally uses variance Finally, the variance decomposition is used to analyze the contribution and association of the responses among the variables.The main conclusions of this paper include: (1) The rise of international coal prices will cause generalized inflation in China's economy, and compared with the CPI, the response generated by the PPI is more pronounced, but the CPI is more profoundly affected. (2) The international coal price shock will produce a particular blow to investment and consumption expectations, but through economic warming, investment levels and consumption expectations will be restored. (3) The rise in international coal prices will reduce the preexisting level of unemployment. Although the rise in international coal prices makes the production costs of energy-intensive industries increase, which will reduce the number of jobs in the industry, it also increases the number of jobs in more energy-saving, emission reduction, and energy consulting services, so the overall level of the unemployment rate has decreased. (4) The rise in international coal prices has not reduced the economy's original output level and has had a relatively small impact on economic growth. Accordingly, this paper puts forward relevant suggestions such as stabilizing market expectations and exploring green financial models.

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Section: Favar Modelmentioning

confidence: 99%

The Impact of International Coal Prices on China's Macroeconomy in The Context of "Double Carbon"

Yin

2024

Proceedings of the 5th Management Science Informatization and Economic Innovation Development Conference, MSIEID 2023, December

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“…Moreover, the use of a Factor-Augmented Vector Autoregressive (FAVAR) approach has shown that monetary policy explains inflation fluctuations rather than stimulating output (Suresh & Jithin, 2020). Another variant of the VAR approach is the structural VAR.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Inflation dynamics in the USA and EU: VAR analysis and forecasting

Cicmil

2023

Int J Econ Practice & Policy

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This paper aims to analyze the relationship between the inflation rate in the USA and the inflation rate in the EU and to make short-term forecasts of their future movements. The Vector Autoregression (VAR) model was used to study the dynamic relationships among multiple variables. The VAR model was fitted on the data with a maximum lag of 5, and the diagnostic checks were performed to ensure it was correctly specified. The results are presented and discussed and the paper concludes by suggesting that future research should focus on addressing the problem of non-stationarity in the residuals and on testing the robustness of the model.

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“…The empirical findings indicate that the monetary instruments used by the Lebanon Central Bank reduced economic growth over the long term. Jithin & Suresh (2020) tested the effectiveness of inflation targeting in India by using an augmented vector autoregression approach (FAVAR) in the years from 2001 to 2016. The findings show that monetary policy effectively explains changes in inflation rather than increasing output.…”

Section: Introductionmentioning

confidence: 99%

Asymmetric Effectiveness of Monetary and Fiscal Policies: Evidence from Turkey

ÖZTÜRK

Altınkaynak

2022

WJAE

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This study assesses the asymmetric effectiveness of Turkey's monetary policy and fiscal policy under the inflation targeting regime in the period of 2006-2020. We employed the non-linear autoregressive distributed lag (NARDL) method and Hatemi-J asymmetric causality test with the assistance of the St. Louis equation, which relates the growth in nominal income with the growth in money supply and public expenditures. The NARDL model revealed that an increase in money supply and gross domestic product (GDP) has a positive relationship. On the other hand, a decrease in money supply and government expenditures have no significant relationship with GDP. In addition, Hatemi-J asymmetric causality results showed an asymmetric causality between money supply and GDP. It demonstrates that the money supply in Turkey during the period 2006-2020 is endogenous.

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Testing for the Effectiveness of Inflation Targeting in India: A Factor Augmented Vector Autoregression (FAVAR) Approach

Cited by 4 publications

References 28 publications

The Impact of International Coal Prices on China's Macroeconomy in The Context of "Double Carbon"

The Impact of International Coal Prices on China's Macroeconomy in The Context of "Double Carbon"

Inflation dynamics in the USA and EU: VAR analysis and forecasting

Asymmetric Effectiveness of Monetary and Fiscal Policies: Evidence from Turkey

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