Monday, June 2, 2014

2 June 2014: Inflation Volatility: How Much More Costly is it for Developing Countries?

Shesadri Banerjee

Scholars and policymakers have unanimously recognized the adverse economic and welfare consequences of inflation. However, relatively less attention is given to inflation volatility and its consequences. Inflation episodes are often more volatile (i.e. inflation fluctuates a lot) in emerging market and developing economies (EMDEs) as compared to advanced countries. This stylized fact raises the question of how costly is it for the EMDEs, such as India, when they suffer such greater volatility of inflation. This paper evaluates the welfare consequence of high inflation volatility by measuring the resulting loss of output. It shows that developing countries incur far greater loss of GDP—nearly twice—than advanced countries as a result of the high volatility of inflation. This finding re-emphasizes the importance of inflation targeting in the monetary policy frameworks of EMDEs, not dissimilar to the recent approach adopted by the Reserve Bank of India.

Date: June 2, 2014
Time: 03:30 P.M.

NCAER Conference Room
National Council of Applied Economic Research
Parisila Bhawan, 11, Indraprastha Estate
New Delhi-110002(INDIA)


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Please join us for tea after the seminar. For queries, please contact Ms Sudesh Bala at or on 011-2345-2669.

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