Revisiting the empirical existence of the Phillips Curve for India

Karan Singh, B and Kanakaraj, A and Sridevi, T.O (2010): Revisiting the empirical existence of the Phillips Curve for India. Published in: Journal of Asian Economics , Vol. 2, No. 22 (1 June 2011): pp. 1-20.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Kalman Filter; Output Gap; Inflation
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General; A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A21 - Pre-college

References

Karan Singh B., A. Kanakaraj and T.O.Sridevi (2011)"Revisiting the Empirical Existence of the Phillips Curve for India", Journal of Asian Economics 22(3), pp 247–258