| This dissertation on Indian business cycles and inflation includes three essays. The first paper finds that U.S. business cycles have been transmitted to the Indian economy, not only since the Indian economic reform of the early 1990s, but also since the early 1960s. Channels of this transmission do not appear to have been through trade, but through monetary policy instead. Under a fixed or a stable exchange rate, Indian interest rates used to follow US interest rates and Indian business cycles used to follow US business cycles as well. Under a floating exchange rate, this relationship collapses suggesting that business cycle transmission from the U.S. to India worked through monetary channels.; The second paper finds that the domestic and global supply shocks, namely droughts and oil crises are the main reasons for the apparent absence of the Phillips curve for India. Once we adequately account for these shocks, and reconstruct data in India's crop year as opposed to fiscal year, the Phillips curve for India emerges in the conventional fashion. The Phillips curve exists even in the pre-reform era suggesting that the economic reform of the early 1990s did not bring any fundamental change in the Phillips curve for India.; The third paper finds that India's liberalization of the early 1990s did not cause structural break either in the mean or in the variance of its industrial growth. On the other hand, industrial growth experienced the first breakpoint in variance in 1983 from low to high volatility, and the second breakpoint in the same parameter in 1996 from high to low volatility. We argue that this high volatility of growth between the breakpoints is attributable to the policy shocks of liberalization, which effectively started in the early 1980s and followed a step-by-step progress until the mid 1990s. |
