vsanthoshkumar2014-blog

[vsanthoshkumar2014-blog]

Research - Economics

Inflation and Industrial production

Inflation has a bearing on consumption and thereby on production. An increase in production also has a bearing on prices.  Much of monetary policy relates to managing inflation and thereby on other key macro-economic variables.  Production is a key macro-economic variable and understanding the impact of inflation on production data and vice versa has important real-world implications.

This paper purports to study the impact of price inflation on production and also examines the possibility of production having a bearing on inflation.

Data Source

The data source is the RBI website.  The website contains data on Wholesale price index and Index of industrial production.  The data link is provided below

https://dbie.rbi.org.in/DBIE/dbie.rbi?site=home

Literature Review

“The growing volatility of inflation and the growing departure of relative prices from the values that market forces alone shall set, combine to render the economic system less efficient” ( page 470) Source: FRIEDMAN, MILTON (1977). Infiation and unemployment (Nobel lecture). Journal of Political Economy. 85, 452-472

Clearly inflation has a bearing on key macroeconomic variables.  This study seeks to understand the interrelationship between Inflation and production data

Devereaux ( 1989) used the Barro Gordon model to analyse data related to inflation and output growth.  The research showed that average rate of inflation was linked to output growth.    

Bipradas (2014) uses productivity as a proxy for output and concludes that he did not find any statistically significant relationship between inflation uncertainty and output growth rate.  Source :  Rit, B. (2014). The relationship between inflation, inflation uncertainty and output growth in india. Economic Affairs, 59(3), 465-477. Retrieved from http://libproxy.globalnxt.edu.my/login?url=https://search.proquest.com/docview/1629702653?accountid=35207