Author: Ashima Goyal
Title: Flexible Inflation Targeting: Concepts and application in India
Abstract: The paper examines considerations that arise in adapting IT to emerging markets (EMs). These include the necessity of flexibility, the working of the expectations channel, the dominance of supply shocks, fiscal-monetary coordination, forecasting issues and guidance of thin markets. Implementation of inflation targeting in India has matured from a strict form that imposed a large output sacrifice, towards flexibility with better forecasting that kept inflation in the tolerance band, contributed to good growth recoveries as well as improved financial parameters in the first two years of the pandemic.
Keywords: Flexible inflation targeting; concepts; India; market imperfections; anchoring
JEL Code: E52; E63; E65