Is Inflation in India an Attractor of Inflation in Nepal?, Issues 2007-2269
International Monetary Fund, Asia and Pacific Department, Nov 1, 2007 - Inflation (Finance) - 30 pages
The paper attempts to answer some important questions around the inflationary process in Nepal, particularly the transmission of inflation from India. Because the Nepali currency is pegged to the Indian rupee and the two countries share an open border, price developments in Nepal would be expected to mirror to those in India. The results show that inflation in India and inflation in Nepal tend to converge in the long run. Our estimates indicate that the passthrough of inflation from India to Nepal takes about seven months. The paper draws some implications for the conduct of monetary policy in Nepal.
What people are saying - Write a review
We haven't found any reviews in the usual places.
Other editions - View all
1b Fails 1b OK Fails 20 percent trim ADF test Asymmetric with 20 attractor of core Cecchetti 1993 cointegrated Condition 1 Condition conditions for core core inflation measures Core lnflation CPl10 No Yes CPM0and distribution of price domestic inflation Economic excluded exclusion-based measures Fails condition 1b food and energy headline inflation implies Indian rupee inflation in India inflation in Nepal Johansen approach lndia long-and short-run relationships measures for Nepal measures of core Measuring Core Inflation monetary policy Nepal and India Nepal Rastra Bank nontradable prices nontradable sectors null hypothesis OK Fails condition p-value percent level persistent component price changes price index relationships between inflation RMSE Root Mean Square Scandinavian model small open economy Staff calculations standard deviation Strict exogeneity supply shocks Table tradable and nontradable trimmed-based measures TRlM10and unbiased core inflation unbiasedness volatile components Wald coefficient restriction WPIFE Yes Yes Pi Yes Yes Yes