TITLE:
Estimation of Unobserved Inflation Expectations in India Using State-Space Model
AUTHORS:
Siddhartha Chattopadhyay, Sohini Sahu, Saakshi
KEYWORDS:
Fisher Equation, Kalman Filter, Expected Inflation, India
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.5,
June
19,
2019
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.