Abstract

This paper examines the factors that effect the monthly inflation rate in India using monthly data from January 2010 to October 2020. Two multiple linear regression models, with and without interaction terms, using least squares method for coefficient estimation have been used to find out which factors have a direct effect on the monthly inflation rate. The results indicate that the Gross Domestic Product (GDP), the interaction between exchange rate and M1 money supply; interaction between bank rate and GDP, and interaction between bank rate and M1 money supply; have a significant influence on the monthly inflation rate in India.

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