Research

Many studies have been conducted to examine the existence of Phillips curve for India however; most of the studies have argued that the Phillips curve exists but only in the short run and that too after controlling for supply shocks. It is not only the past values of inflation that are crucial for determining inflation but the forward-looking inflation expectations play an equally important role. However, most of the studies conducted till now have only focused on the quantitative estimates of the inflation expectations. In this context, this paper attempts to estimate a different series of inflation expectations that have been generated by accounting qualitative estimates of expectations along with the quantitative figures. Empirical findings show evidence of the existence of the NKPC for India. The results also indicate a significant role of inflation expectations in affecting inflation, thus providing credibility to monetary policymaking. 

This study uses a Bayesian time-varying parameter with stochastic volatility (TVP-SV) approach to analyze the behavior of inflation persistence across monetary regimes spanning hundred and fifty years from 1870 to 2020. Using long-term macroeconomic data to estimate a Phillips curve for the UK and the US, we find evidence for large variations in inflation persistence across time. Further leveraging the time-varying estimates of inflation persistence and our measure of regime credibility, we show that credibility can play a crucial role in determining inflation dynamics in an economy. Empirical evidence for both countries indicates that a higher degree of regime credibility leads to lower inflation persistence. Providing narrative evidence to support our econometric findings, we conclude that credible conduct of monetary policy is crucial for achieving and sustaining price stability on a durable basis. 

The Federal Reserve Board will start a strategy review by the end of 2024 and intends to complete it about a year later. After its only previous review, the Federal Open Market Committee adopted a far-reaching Revised Statement on Longer-Run Goals and Monetary Policy Strategy in August 2020. We analyze and develop policy rules that are either in accord with the original 2012 statement or inspired by the revised 2020 statement and use the rules to evaluate monetary policy using the Federal Reserve Board/United States model. We evaluate policy rules categorized by traditional, shortfalls, Asymmetric Coefficient Inflation Targeting, and Asymmetric Target Inflation Targeting versions of non-inertial and inertial Taylor and balanced approach rules. Economic performance is better with balanced approach rules than with Taylor rules, worse with shortfalls rules than with traditional rules, better with inertial rules than with non-inertial rules, and better with the two asymmetric inflation targeting rules than with traditional rules.

It is not to be doubted that the oil price shocks adversely impact the economy. Enough literature is present in support of this fact but, at the same time, it is equivalently important to determine the changing nature of this relationship. This paper studies the changing behavior of this relation from 1948-2018 and shows that the oil prices are no more as effective in explaining the changes in the output of the economy as it had been before the 1970s. Our results also show the extent to which oil intensity has reduced in effecting the output of the US economy along with explaining the short term and long term impacts of oil shocks. Through variance decomposition analysis, the paper explains the reason for this decline in oil importance in recent time. Various factors like changing technology and political and strategic implications are found to be a few of the many reasons behind this change.