Fiscal transfers and inflation: Evidence from India

Bahal, Girish and Shrivastava, Anand (2022) Fiscal transfers and inflation: Evidence from India. Empirical Economics, 63 (4). pp. 1837-1858. ISSN 0377-7332

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Abstract

Controlling for monetary policy, government transfers are potentially inflationary. This, however, may not be true when the economy is demand-constrained. Using panel data of 17 Indian states over 30 years, we show that government transfers via welfare programs do not lead to inflation. For identification, we use a narrative shock series of transfer spending based on the introduction of new welfare programs. We re-examine the relationship between government transfers and inflation by studying whether the recent implementation of India’s public workfare program, NREGA, had aggregate price effects. Using the phase-wise implementation design of the program, we confirm the absence of any association between higher program coverage and price inflation.

Item Type:	Article
Authors:	Bahal, Girish and Shrivastava, Anand
Document Language:	Language English
Subjects:	Social sciences > Economics > Economics of land & energy Social sciences > Economics > Macroeconomics & related topics
Divisions:	Azim Premji University - Bengaluru > School of Arts and Sciences
Full Text Status:	Restricted
URI:	http://publications.azimpremjiuniversity.edu.in/id/eprint/7068
Publisher URL:	https://doi.org/10.1007/s00181-021-02195-0

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