ABSTRACT
The chapter attempts to investigate the dynamic relationship between globalization and inflation empirically in post-reform India. We quantify globalization in terms of trade openness and FDI inflow. Inflation in this context is measured by the consumer price index. The money supply and aggregate demand of the economy (measured by per capita GDP) are controlled. Using the Reserve Bank of India (RBI) (2019) database from 1991–92 to 2018–19, we carry out unit root tests to scrutinize the stochastic features of time series variables. The structural break incorporated unit root test is also conducted followed by applications of the Johansen co-integration test and vector error correction model. Empirical findings indicate a unidirectional causality between globalisation and the level of inflation in post-reform India.
