Programme Schedule (draft)

Programme Speakers

1. V Anantha Nageswaran (Ministry of Finance, Department of Economic Affairs)

Title: Trade, Technology and Energy: Drivers Shaping the Global Economy 

2. Anshuman Tuteja (Ashoka University)

Title: Household Inflation Expectations and Labour Market Outcomes

Abstract: Using data from the New York Fed's Survey of Consumer Expectations, we study how personal labour market experiences shape household inflation expectations. We find that households revise inflation expectations in response not only to inflation news, but also to unexpected labour market outcomes: receiving more job offers than expected is associated with higher inflation expectations. Households also update expectations of future wages and job offers in response to unexpected labour market outcomes. The response of inflation expectations to new information varies over time, with greater sensitivity to inflation forecast errors since 2021. In a search-and-matching model in which households have incomplete information about the state of the economy, we show that labour market outcomes provide informative signals about inflation and use our estimates to calibrate the resulting Kalman updating equations. This belief formation process alters the transmission of structural shocks and affects household welfare relative to full-information and model-consistent learning benchmarks.

3.  Anindo Sarkar (Indian School of Business)

Title: Optimal fiscal financing under political distortions

Abstract: In this paper, we examine how political economy reshapes optimal joint monetary-fiscal policy. In a setting where monetary and fiscal policies are jointly determined, the political economy force of legislative bargaining introduces a common-pool problem that creates a debt bias. Economies with higher political distortions have higher steady-state debt. This increases both the inflation bias and the debt-stabilization bias associated with time-consistent policy. As a result, economies with higher political distortions tend to front-load inflation and reduce debt significantly following fiscal and cost-push shocks. A rules-based monetary policy can act as a disciplining mechanism, whereby a more active.

4.  Kuldeep Singh (Indian Institute of Management Bangalore)

Title: Risky Business and the Process of Development 

Abstract: Risk is an important factor that affects investment decisions, especially for undiversified entrepreneurs in less developed economies. Yet standard macro models of financial frictions do not incorporate risk: short-term returns are known in advance, and investment is fully reversible. Thus, even if entrepreneurs are risk averse and credit  constrained, they will invest all of their assets in the firm, until the marginal product of capital equals the interest rate. As a result, standard models often find that productive entrepreneurs quickly save their way out of credit constraints, limiting the effect of financial frictions on output and aggregate productivity. We incorporate risk into a model of financial frictions, by making investment partially irreversible. Productive entrepreneurs accumulate capital substantially more slowly than in the first-best, leading to a reduction in aggregate productivity. Credit can play a role in undoing these frictions if firms have an option to default. Default creates a state-contingent contract, in which the entrepreneur repays if productivity stays high and defaults if productivity falls; this encourages investment and improves welfare through risk-sharing with the bank.

5.  Piyali Banerjee (Ashoka University)

Title: Common Shocks and Co-movement: The Dynamics of States' Liability in India 

Abstract: This paper examines the co-movement of state-level liabilities in In- dia across 21 states from 1994 to 2024. A dynamic factor model with time-varying loadings and stochastic volatility decomposes the liabilities-to- GSDP ratio into national, liability-specific, and state-specific components. The national factor explains 81.5% of the variance on average. Its share falls from 86.1% before GST to 68.1% amid and after GST, while the liability- specific and state-specific shares rise to 13.3% and 18.6%. GST thus shifted the locus of fiscal risk rather than removing it. State-level synchronization with the national factor shows the same divergence. Transfer-dependent states such as Bihar, Jammu and Kashmir, and Meghalaya move closer to the national cycle after 2017, whereas Gujarat, Uttar Pradesh, and Odisha decouple from it. Fractional logit estimates for 1994–2022 link these factor shares to state fiscal and political characteristics. Own tax revenue, inter- nal debt, and law-and-order spending reduce exposure to national volatility. Development expenditure, largely scheme-linked, and the accumulation of total and other liabilities increase it. Political alignment with the Centre matters only through the liability-specific margin. The results favor liability- specific borrowing ceilings over a uniform debt anchor, transitional support targeted at the states most affected by GST, and incentives for own-revenue mobilization.

6. Ankit Kumar (Indian Institute of Management Calcutta)

Title: Central Bank Forex Intervention and Long Term Interest Rate in Emerging Economies

Abstract: Can foreign exchange intervention shield emerging-market long-term yields from U.S. monetary policy? I study the question in a two-country model with segmented bond markets, in which leverage-constrained banks fund part of their lending in dollars, the interbank rate rises above the policy rate when central-bank reserves are scarce, and the central bank can intervene in both the spot and the forward market. A U.S. tightening raises the long-term yield, and the two instruments act on it differently.Spot sales of dollars limit the depreciation, which protects the net worth of banks that owe dollars and lowers the term premium, but they also drain reserve money and raise the interbank rate, which raises it. Relief dominates when few reserves are sold and the drain when many are, so the response of the long-term yield first falls and then rises with the scale of spot intervention. Forward sales provide the relief without the drain. Defending the currency with the policy rate spends no reserves and spares the money market, but it keeps the policy rate relatively higher. Beyond small corrections, it therefore raises the long-term yield more, deepens the fall in investment and costs the banks more capital than the spot intervention that removes the same share of the depreciation. Daily long-term yields and term premia around FOMC announcements in twenty-one emerging economies support these predictions. Light spot intervention reduces the spillover, heavy spot intervention raises it again to its no-intervention level, and adding forward intervention to spot intervention removes the rise in the term premium that spot intervention alone leaves.

7. Dony Alex (O.P Jindal Global University)

Title: Anchored or Just Quieter? Inflation Targeting and Trend Inflation in Emerging Economies

Abstract: This paper asks whether inflation targeting in emerging economies anchored the permanent component of inflation or merely made observed inflation quieter. We estimate a semi-structural bivariate unobserved-components model with a time-varying Phillips curve, stochastic trends, and stochastic volatility, by Bayesian methods, for Brazil, Chile, India, Indonesia, Mexico, and South Africa, decomposing inflation into a permanent trend and a transitory gap. Anchoring is assessed jointly using three model-based diagnostics: trend-shock volatility, the trend's contribution to inflation variation at business-cycle horizons, and inflation-gap persistence. These diagnostics frequently diverge. Trend-shock volatility declined during the inflation-targeting period almost everywhere, most sharply in Mexico, but all three diagnostics jointly support anchoring only in post-2011 India, post-2005 South Africa, and pre-COVID Mexico. Indonesia, recent Chile, and Brazil do not receive joint support. Decomposing cyclical inflation, we find that the output-gap component makes a sustained contribution only in Brazil and post-2015 Chile, and episodically in Mexico. Phillips-curve residuals dominate in India and Indonesia and, on average, South Africa, showing that a steep slope need not imply a large output-gap contribution to cyclical-inflation variance.

8. Gautam Udupa (CAFRAL, Mumbai)

Title: Food, Fuel, and Facts: Distributional Effects of Global Price Shocks

Abstract: We estimate causal distributional effects of global food and oil price shocks by utilizing monthly panel data on consumption and income from India, and an IV strategy that removes variation coming from global demand shocks. While both shocks lead to stagflationary aggregate dynamics, they differ in terms of distributional consequences. Consumption of lower income deciles is affected more by exogenous increases in food prices, while consumption of both tails of the income distribution is affected similarly by exogenous increases in oil prices. These dynamic heterogeneous negative consumption responses mirror the pattern of heterogeneity in wage income responses.  Increases in relative expenditure on food, despite a rise in the relative local price of food, provide clear evidence for non-homothetic demand in non-durable consumption. Estimating the slopes of the Engel curve by impulse response matching, we find that food, compared to fuel, is a necessary consumption good for all income groups. Comparing the model predictions with the dynamic empirical consumption responses, we decompose the role played by wage income, relative price changes, and non-homotheticity in explaining our results. 

9. Chakshu Jain (Indian Statistical Institute Delhi)

Title: The Indian Pension System and the Macroeconomy 

Abstract: As India's population ages and most workers remain outside formal retirement protection, pension design has become a central policy question. We develop a large-scale heterogeneous-agent computable overlapping-generations model of India's pension system, distinguishing contributors, non- contributors, and non-pensioners. Although households receive other forms of transfers, formal pension coverage is narrow: a small fraction contribute, while the vast majority have no pension at all. Pensioners supply more labor than non-pensioners in middle age, so pension arrangements reshape the life- cycle allocation of work.We also conduct a preliminary welfare analysis of the current system, examining how the replacement rate and the narrow contributor base shape welfare and fiscal sustainability. (Work in progress).

Organizing Committee:

 Chetan Ghate  (ISI Delhi)

 Monisankar Bishnu (ISI Delhi)

Athisii (ISI Delhi and Program Coordinator)