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.
Authors
- Manoj Kumar Aguru
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