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Estimation of Unobserved Inflation Expectations in India Using State-Space Model
Department of Humanities and Social Sciences, Indian Institute of Technology, Kharagpur, India
Department of Economic Sciences, Indian Institute of Technology, Kanpur, India
Department of Economic Sciences, Indian Institute of Technology, Kanpur, India
- 1 Department of Humanities and Social Sciences, Indian Institute of Technology, Kharagpur, India
- 2 Department of Economic Sciences, Indian Institute of Technology, Kanpur, India
- 3 Department of Economic Sciences, Indian Institute of Technology, Kanpur, India
Theoretical Economics Letters·Volume 09 (2019)·Pages 1480–1488·Published 7 May 2019·DOI10.4236/tel.2019.95095
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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.
KeywordsFisher EquationKalman FilterExpected InflationIndia
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