ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Understanding Inflation Dynamics in India

The flexible inflation targeting framework was formally adopted by India in 2016 with an amendment to the Reserve Bank of India Act. This paper attempts to throw light on the dynamics of consumer price index headline, core, and food inflation, using a relatively young and atheoretical approach pioneered by Stock and Watson in 2007. The empirical results, indicating that the behaviour of core inflation is different from that of headline and food inflation, have implications for the conduct of monetary policy.
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