Press release – RBI Working Paper No. 06/2021: An Alternative Perspective on Demand and Supply to Forecast Inflation (dated – 16.12.2021) –RBI.
View PdfPress release – RBI Working Paper No. 06/2021: An Alternative Perspective on Demand and Supply to Forecast Inflation (dated – 16.12.2021) –RBI.
- The Reserve Bank of India today placed on its website a Working Paper titled “An Alternative Perspective on Demand and Supply to Forecast Inflation” under the Reserve Bank of India Working Paper Series1. The Paper is authored by Saurabh Sharma and Ipsita Padhi.
- The paper develops a new method to construct a measure of demand-supply imbalance in the economy using a Bayesian Dynamic Factor Model. The estimated index of demand-supply mismatch is found to have a causal relationship with headline inflation. It is also found to be a competing predictor of headline inflation, as compared to other conventional measures of slack such as the output gap and level of capacity utilization, refer attachment for further details.
