Monday, August 11, 2008
Working paper `Early warnings of inflation in India'
A new paper on this subject by Rudrani Bhattacharya, Ila Patnaik and myself has been released as a working paper by the Planning Commission and by NIPFP. The abstract reads: 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. A file with the key time-series data figuring in the paper has also been released for public download. Also see this article by Ila Patnaik in Indian Express which has a non-technical explanation of the paper.