Estimation of Unobserved Inflation Expectations in India Using State-Space Model - Theoretical Economics Letters

TEL > Vol.9 No.5, June 2019

Estimation of Unobserved Inflation Expectations in India Using State-Space Model ()

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DOI: 10.4236/tel.2019.95095 493 Downloads 1,247 Views

Author(s)

Siddhartha Chattopadhyay^1*, Sohini Sahu², Saakshi²

Affiliation(s)

¹Department of Humanities and Social Sciences, Indian Institute of Technology, Kharagpur, India.
²Department of Economic Sciences, Indian Institute of Technology, Kanpur, India.

ABSTRACT

This paper estimates the unobserved inflation expectations in India between 1993: Q1 to 2017: Q1 from the Fisher equation relation based on the state space approach using Kalman Filter. We find inflation forecast obtained from Fischer equation by applying Kalman Filter match well with the inflation forecasts made by the Survey of Professional Forecasters and Inflation Expectations Survey of Household conducted by the Reserve Bank of India and the International Monetary Fund for the Indian economy.

KEYWORDS

Fisher Equation, Kalman Filter, Expected Inflation, India

Share and Cite:

Chattopadhyay, S. , Sahu, S. and Saakshi, . (2019) Estimation of Unobserved Inflation Expectations in India Using State-Space Model. Theoretical Economics Letters, 9, 1480-1488. doi: 10.4236/tel.2019.95095.

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