Saturday, August 9, 2008

Early warnings of inflation in India

NIPFP Working Paper 54,

Rudrani Bhattacharya, Ila Patnaik and Ajay Shah
August, 2008

In India, year-on-year percentage changes of price indexes are widely used as the measure of inflation. In terms of monthly data, each observation of a one-year change in inflation is the sum of twelve one-month changes. This suggests that better information about inflationary pressures can be obtained using point-on-point monthly changes. This requires seasonal adjustment. We apply standard seasonal adjustment procedures in order to obtain a point-on-point seasonally adjusted monthly time-series of inflation in India. In three interesting high inflation episodes – 1994-95, 2007 and 2008 - we find that this data yields a faster and better understanding of inflationary pressures.

This paper also appeared as Planning Commission Working Paper No. 1/2008- PC

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