Inflation Targeting in India : An Interim Assessment
This paper provides an assessment of India’s inflation-targeting regime. It shows that the Reserve Bank of India is best characterized as a flexible inflation targeter: contrary to criticism, it does not neglect changes in the output gap when setti...
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World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/480251601919547142/Inflation-Targeting-in-India-An-Interim-Assessment http://hdl.handle.net/10986/34593 |
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okr-10986-345932022-09-20T00:08:52Z Inflation Targeting in India : An Interim Assessment Eichengreen, Barry Gupta, Poonam Choudhary, Rishabh INFLATION MONETARY POLICY EXCHANGE RATE This paper provides an assessment of India’s inflation-targeting regime. It shows that the Reserve Bank of India is best characterized as a flexible inflation targeter: contrary to criticism, it does not neglect changes in the output gap when setting policy rates. The paper does not find that the Reserve Bank of India became more hawkish following the transition to inflation-targeting; to the contrary, adjusting for inflation and the output gap, policy rates became lower, not higher. Some evidence suggests that inflation has become better anchored: increases in actual inflation do less to excite inflation expectations, indicative of improved anti-inflation credibility. The question is whether the shift to inflation-targeting has enhanced the credibility of monetary policy such that the Reserve Bank of India is in a position to take extraordinary action in response to the Covid-19 crisis. The paper argues that the rules and understandings governing inflation-targeting regimes come with escape clauses allowing central banks to shelve their inflation targets temporarily, under specific circumstances satisfied by the Covid-19 pandemic. The paper provides evidence that inflation-targeting central banks were able to respond more forcefully to the Covid-19 crisis, consistent with the idea that inflation expectations were better anchored, providing more policy room for maneuver. 2020-10-08T14:07:40Z 2020-10-08T14:07:40Z 2020-10 Working Paper http://documents.worldbank.org/curated/en/480251601919547142/Inflation-Targeting-in-India-An-Interim-Assessment http://hdl.handle.net/10986/34593 English Policy Research Working Paper;No. 9422 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper South Asia India |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
INFLATION MONETARY POLICY EXCHANGE RATE |
| spellingShingle |
INFLATION MONETARY POLICY EXCHANGE RATE Eichengreen, Barry Gupta, Poonam Choudhary, Rishabh Inflation Targeting in India : An Interim Assessment |
| geographic_facet |
South Asia India |
| relation |
Policy Research Working Paper;No. 9422 |
| description |
This paper provides an assessment of
India’s inflation-targeting regime. It shows that the
Reserve Bank of India is best characterized as a flexible
inflation targeter: contrary to criticism, it does not
neglect changes in the output gap when setting policy rates.
The paper does not find that the Reserve Bank of India
became more hawkish following the transition to
inflation-targeting; to the contrary, adjusting for
inflation and the output gap, policy rates became lower, not
higher. Some evidence suggests that inflation has become
better anchored: increases in actual inflation do less to
excite inflation expectations, indicative of improved
anti-inflation credibility. The question is whether the
shift to inflation-targeting has enhanced the credibility of
monetary policy such that the Reserve Bank of India is in a
position to take extraordinary action in response to the
Covid-19 crisis. The paper argues that the rules and
understandings governing inflation-targeting regimes come
with escape clauses allowing central banks to shelve their
inflation targets temporarily, under specific circumstances
satisfied by the Covid-19 pandemic. The paper provides
evidence that inflation-targeting central banks were able to
respond more forcefully to the Covid-19 crisis, consistent
with the idea that inflation expectations were better
anchored, providing more policy room for maneuver. |
| format |
Working Paper |
| author |
Eichengreen, Barry Gupta, Poonam Choudhary, Rishabh |
| author_facet |
Eichengreen, Barry Gupta, Poonam Choudhary, Rishabh |
| author_sort |
Eichengreen, Barry |
| title |
Inflation Targeting in India : An Interim Assessment |
| title_short |
Inflation Targeting in India : An Interim Assessment |
| title_full |
Inflation Targeting in India : An Interim Assessment |
| title_fullStr |
Inflation Targeting in India : An Interim Assessment |
| title_full_unstemmed |
Inflation Targeting in India : An Interim Assessment |
| title_sort |
inflation targeting in india : an interim assessment |
| publisher |
World Bank, Washington, DC |
| publishDate |
2020 |
| url |
http://documents.worldbank.org/curated/en/480251601919547142/Inflation-Targeting-in-India-An-Interim-Assessment http://hdl.handle.net/10986/34593 |
| _version_ |
1764481234736513024 |