Inflation Persistence and Regime Change in India, 1961–2025: Frequentist and Bayesian AR(1) Estimates with an Ornstein–Uhlenbeck Interpretation

Using the World Bank WDI series for Indian consumer-price inflation (FP.CPI.TOTL.ZG, 1960–2025, source update 8 October 2026), I estimate first-order autoregressions by sub-period, test for parameter instability, and re-estimate under a conjugate Normal–Inverse-Gamma prior. Mean inflation fell from 7.75% (1991–2015) to 4.74% (2016–2025) and the standard deviation from 3.21 to 1.40 percentage points; Welch and Brown–Forsythe tests reject equal means (p = 0.0005) and equal variances (p = 0.004). Persistence, by contrast, is not estimated precisely enough to support a claim of change: the post-2016 posterior 90% interval for the AR coefficient is [−0.23, 0.86]. The data identify a lower and more stable level of inflation after the 2016 target notification, not a change in its dynamics, and they cannot attribute the change to the target regime.

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Publication Details

Journal
Zenodo (CERN European Organization for Nuclear Research)
Published
2026-10-18
DOI
https://doi.org/10.5281/zenodo.23450058
Primary Topic
Monetary Policy and Economic Impact
Type
preprint
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preprint

Inflation Persistence and Regime Change in India, 1961–2025: Frequentist and Bayesian AR(1) Estimates with an Ornstein–Uhlenbeck Interpretation

Manoj Kumar Aguru
Zenodo (CERN European Organization for Nuclear Research)
Monetary Policy and Economic Impact
preprint

Inflation Persistence and Regime Change in India, 1961–2025: Frequentist and Bayesian AR(1) Estimates with an Ornstein–Uhlenbeck Interpretation

Manoj Kumar Aguru
preprint en

Abstract

Using the World Bank WDI series for Indian consumer-price inflation (FP.CPI.TOTL.ZG, 1960–2025, source update 8 October 2026), I estimate first-order autoregressions by sub-period, test for parameter instability, and re-estimate under a conjugate Normal–Inverse-Gamma prior. Mean inflation fell from 7.75% (1991–2015) to 4.74% (2016–2025) and the standard deviation from 3.21 to 1.40 percentage points; Welch and Brown–Forsythe tests reject equal means (p = 0.0005) and equal variances (p = 0.004). Persistence, by contrast, is not estimated precisely enough to support a claim of change: the post-2016 posterior 90% interval for the AR coefficient is [−0.23, 0.86]. The data identify a lower and more stable level of inflation after the 2016 target notification, not a change in its dynamics, and they cannot attribute the change to the target regime.

Zenodo (CERN European Organization for Nuclear Research)
Monetary Policy and Economic Impact
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Inflation Persistence and Regime Change in India, 1961–2025: Frequentist and Bayesian AR(1) Estimates with an Ornstein–Uhlenbeck Interpretation — Manoj Kumar Aguru · Zenodo (CERN European Organization for Nuclear Research) (2026) | TGRS Research Map | TGRS