An Empirical Analysis of the Relationship between WPI and PMI-Manufacturing Price Indices in India

Khundrakpam, Jeevan Kumar and George, Asish Thomas (2012): An Empirical Analysis of the Relationship between WPI and PMI-Manufacturing Price Indices in India. Published in: RBI WORKING PAPER SERIES , Vol. 2013, No. W P S (DEPR): 06 (July 2013): pp. 1-17.

Abstract

Manufacturing Purchasing Managers Index (PMI) has been increasingly used by various central banks for assessing the direction and strength of economic activity. One of the sub-indices or component level information provided by PMI is that of industrial input and output prices trends as surveyed by firms’ purchasing managers. In this context, the paper tries to examine whether these PMI manufacturer’s price diffusion indices serve as a useful indicator for understanding changes in WPI in India. The analysis was carried out using both OLS estimates and ARDL approach to cointegration for the period April 2005 to October 2012. It is found that both the PMI price indices are good indicators and have significant predictive power of the changes in WPI–All commodities and WPI–Non-food manufactured products.

• Item Type: MPRA Paper
• Language: English
• Keywords: PMI, WPI, ARDL, price, forecasting
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications

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