Weekly Economics Seminar by Shekhar Tomar
October 23 @ 1:30 pm - 2:40 pm
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Title: Does Inflation Targeting Anchor Inflation Expectations? Evidence from India
Speaker: Shekhar Tomar, Assistant Professor, Indian School of Business, Hyderabad
Abstract: We use a novel survey data on inflation expectations of households to evaluate the role of inflation targeting (IT) regime in achieving anchored inflation expectations. This data is available both before and after the adoption of IT by India in 2015 and allows comparison of inflation expectations between the two periods. We find evidence for anchored inflation expectations in every component of consumer price inflation, headline, food and non-food, only during the IT period. More importantly, we find a muted spillover from food inflation to both food and non-food inflation expectations in this period. The lack of spillover from food inflation, which remained equally volatile in both periods, explains the anchored expectations and improved inflation performance under the IT regime.