For an inflation targeting Central Bank, a precise estimate of the threshold inflation in the economy is important. Existing studies provide estimates without any coherent theory of growth and threshold inflation and hence suffer from several limitations about concept and measurement. The present paper attempts to develop such a theory to establish a stable steady state growth solution. It also operationalizes the theory through a model with support from the Indian data for specific components of the model to derive the required functional form. Final estimates in India with annual data from 1995–96 to 2017–18 show that the threshold inflation and associated optimal growth vary considerably as rates of fiscal deficit and current account deficit on the balance of payments vary. The current combinations of the long term four policy targets of 4% inflation; 8% growth; 6% fiscal deficit (to GDP); and 2% current account deficit (to GDP) are internally inconsistent and hence not achievable. Now that there is an opportunity to revise the inflation target for the period after March 2021, the present paper argues for choosing from the menu of internally consistent options for all these four policy targets to avoid unnecessary costs.

中文翻译：

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具有估计的增长和阈值通货膨胀理论

对于以中央银行为目标的通胀，准确估算经济中的阈值通胀非常重要。现有研究提供的估计数没有任何连贯的增长理论和阈值通货膨胀理论，因此在概念和度量方面受到一些限制。本文试图发展这种理论以建立稳定的稳态增长解。它还通过一个模型将理论付诸实践，并得到印度数据的支持，以获取模型的特定组成部分，以得出所需的功能形式。印度的最终估计数（含1995–96年至2017–18年度数据）显示，随着国际收支上的财政赤字和经常账户赤字率变化，阈值通货膨胀率和相关的最佳增长也相差很大。当前将4％通货膨胀率作为长期政策目标的组合；增长8％；财政赤字（占GDP的6％）；和2％的经常账户赤字（相对于GDP）内部不一致，因此无法实现。既然现在有机会修改2021年3月之后的通胀目标，本论文主张从所有这四个政策目标的内部一致选项菜单中进行选择，以避免不必要的成本。