Effect of inflation on economic activity and eventually on well-being of people has always been a primary concern for policy makers and has gained the attention of much study. The question raised by many economists is that whether inflation is affects by other variables in the economy. Therefore, this study attempts to investigate the relationship between inflation, call money rate, output gap, capital flows, seigniorage, fiscal deficit and supply shock in India after the reforms in the framework of Lucas’ theory of price. The study uses ARDL bounds test approach to estimate the long run relationship among these variables by utilising annual time series data from 1991 to 2016.
Monetary Policy, Inflation, ARDL, Threshold cointegration
