Economics, Econometrics and Finance
8 years ago

Inflation Drives Interest Rates: Market Forces at Play in India

SSRN Electronic Journal
Long-Run Relatinship Between Interest Rates and Inflation: An Error Correction Model
M. Thenmozhi, S. Radha

Paper Summary

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The study looked at how interest rates in India are affected by inflation. Before the 1990s, interest rates were fixed, but after economic reforms, they became more market-driven. By analyzing data, the researchers found that inflation influences short-term and long-term interest rates, showing that interest rates now respond more to market conditions.