Social and Behavioral Sciences Commons^™

Is Inflation Caused By Conflict?, Nicolas Cachanosky, Emilio Ocampo

Hunt Institute Working Paper Series

We offer a critique of a paper recently published Lorenzoni and Werning (2023) that seeks to make an original contribution to the hypothesis that inflation is primarily caused by conflict and reconcile the Post-Keynesian and New-Keynesian traditions. L&W’s paper has two sections. In the first they develop a barter model that allows them to prove that inflation can occur with conflict and without money. In the second section they incorporate the conflict hypothesis into a broader framework compatible with New Keynesian models. We question the logical consistency and empirical validity of the barter model and the testability of the model …

Intersectoral Conflict And Delays In Macroeconomic Stabilization, Arslan Razmi

Economics Department Working Paper Series

An important body of literature explores the political economy reasons
underlying delays in macroeconomic stabilization. This paper develops
a framework to analyze conflict between two groups of economic actors,
one that has an endowment of internationally tradable goods and another
that is endowed with non-tradable goods. The focus is on the exchange
rate policy in a developing country set-up where the government employs
seigniorage revenue to finance spending pre-stabilization, and faces fiscal
and balance of payments problems that necessitate stabilization with a step
devaluation. The presence of exchange rate and endowment uncertainty,
the role of forward-looking expectations, and the possibility …

Reflections On Inflation: How Bad Has It Been?, Jesus Felipe

Angelo King Institute for Economic and Business Studies (AKI)

THE increase in prices that countries have experienced since March 2022 has brought old fears about the deleterious impact of inflation. It is true that prices increased after the Russian invasion of Ukraine and this affected a series of commodities that are imported. Yet, it is important to understand how much prices have increased, the nature of inflation we have experienced, and the reaction of central banks.

The Macrodynamics Of Indian Rupee Swap Yields, Tanweer Akram, Khawaja Mamun

WCBT Working Papers

This paper econometrically models the dynamics of Indian rupee (INR) swap yields based on key macroeconomic factors using the autoregressive distributive lag (ARDL) approach. It examines whether the short-term interest rate has a decisive influence on long-term INR swap yields after controlling for other factors, such as core inflation, the growth of industrial production, the logarithm of the equity price index, and the logarithm of the INR exchange rate. The estimated models show that the short-term interest rate has an important influence on the swap yields. This implies that the Reserve Bank of India (RBI) can sway borrowing and lending …

Survey Of Professional Forecasters 2023, Singapore Management University

Sim Kee Boon Institute for Financial Economics

Forecasters Maintain Their Expectations for Growth in 2023 The forecasters see the U.S. economy in 2023 expanding at the same pace as they predicted three months ago, according to 38 panelists surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict annual-average over annualaverage growth in real GDP of 1.3 percent in 2023, unrevised from their estimate of three months ago. The panelists are also maintaining their forecast for growth in the second quarter at an annual rate of 1.0 percent, unchanged compared with their previous projection. However, while their predictions for the second quarter and for 2023 remain …

An Inquiry Concerning Japanese Yen Interest Rate Swap Yields, Tanweer Akram, Khawaja Mamun

WCBT Working Papers

This paper econometrically models Japanese yen (JPY)–denominated interest rate swap yields. It examines whether the short-term interest rate exerts an influence on the long-term JPY swap yield after controlling for several key macroeconomic variables, such as core inflation, the growth of industrial production, the percentage change in the equity price index, and the percentage change in the exchange rate. It also tests whether there are structural breaks in the dynamics of Japanese swap yields and related variables. The estimated econometric models show that the short-term interest rate exerts an important influence on the long-term swap yield in some periods but …

The American Dream: Living Paycheck To Paycheck, Benjamin Henwood

Richard T. Schellhase Essay Prize in Ethics

A debate that has gained traction due to recent economic circumstances is how the United States government should raise the federal minimum wage, and if they should raise it at all. I propose the United States government should raise the federal minimum wage by implementing a living wage or tying the federal minimum wage to inflation. Implementing a living wage would benefit workers as it would cover the cost of living in their geographic area. It would also benefit employers as their employees would be getting paid according to their needs rather than being paid a blanket wage that may …

Part 5: Virginia's Hotel Industry Grows, But Change Is Coming, Dragas Center For Economic Analysis And Policy, Old Dominion University

State of the Commonwealth Reports

This chapter assesses the performance of the hotel industry in the Commonwealth and discusses the challenges facing the hotel industry in 2024 and beyond. To understand the prospects for growth, we examine the recovery from the shock of 2020 and how different areas of the commonwealth fared with regard to hotel revenue and occupancy. We take stock of the competitive environment and how labor shortages continue to challenge hoteliers. We ask: what does the future hold for the hotel industry in Virginia?

Part 1: Virginia's Economy Grows, But Questions Linger About The Future, Dragas Center For Economic Analysis And Policy, Old Dominion University

State of the Commonwealth Reports

There is good news to report about the economy of the Commonwealth. Economic activity increased in 2022 and 2023. A record number of Virginians were at work or looking for work. Labor force participation increased above pre-pandemic levels. However, this news is tempered by the fact that Virginia grew slower than the nation and Virginians continue to migrate out of the Commonwealth. The Virginia economy should grow in 2024, but work remains to be done to match the economic performance of our peers.

Chinese Yuan Interest Rate Swap Yields, Tanweer Akram, Khawaja Mamun

WCBT Faculty Publications

This paper models the dynamics of Chinese yuan–denominated long-term interest rate swap yields. It shows that the short-term interest rate exerts a decisive influence on the long-term swap yield after controlling for various macrofinancial variables, such as core inflation, the growth of industrial production, the percent change in the equity price index, and the percentage change in the Chinese yuan exchange rate. The autoregressive distributed lag approach is applied to model the dynamics of the long-term swap yield. The findings reinforce and extend John Maynard Keynes’s conjecture that in advanced countries, as well as emerging market economies such as China, …

Is Fed Policy In The Eye Of The Beholder?, Leo Krippner, Thomas Lam

Sim Kee Boon Institute for Financial Economics

While the US Federal Reserve remains vigilant on inflation, it will likely continue its tightening cycle with caution, with an eye on market expectations about future policy actions and financial conditions.

Skbi Big 5 Survey 2022 August, Singapore Management University

Sim Kee Boon Institute for Financial Economics

The latest survey results on the largest five economies (Big5) were revised markedly relative to the prior release (pre-Russia-Ukraine conflict), generally indicating weaker growth and higher inflation coupled with incremental ambiguity on the policy front.

Inflation Expectations Can Be A Self-Fulfilling Prophecy, Aurobindo Ghosh, Khyati Chauhan, Muskan Bagrodia

Research Collection Lee Kong Chian School Of Business

In a commentary, SMU Assistant Professor of Finance (Education) Aurobindo Ghosh, SMU postgraduate student and Research Assistant for the SInDEx Project Muskan Bagrodia and International Monetary Fund Economic Research Assistant Khyati Chauhan weighed in on why inflation expectations matter as much as economic data. They discussed how inflation expectations can be a self-fulfilling prophecy, and shared the key takeaways of the quarterly DBS-Sim Kee Boon Institute’s Singapore Index of Inflation Expectations (DBS-SKBI SInDEx) survey. They concluded that effective communication on inflation control measures, in addition to credible policy decisions, will help consumers feel assured and refrain from basing purchasing decisions …

Inflation And Ukraine War Make It Challenging For Our Beloved Value Stores To Survive, Aurobindo Ghosh, Taimur Baig

Research Collection Lee Kong Chian School Of Business

In a joint commentary, SMU Assistant Professor of Finance (Education) and Principal Investigator of DBS-SKBI Singapore Index of Inflation Expectations Project Aurobindo Ghosh and Chief Economist and Managing Director at DBS Bank Dr Taimur Baig discussed how global inflationary pressures and rising commodity prices due to war in Ukraine and sanctions against Russia are culminating into a perfect storm and making it challenging for value stores to survive. They also gave advice on what value stores can do to survive this perfect storm.

Conditional Superior Predictive Ability, Jia Li, Zhipeng Liao, Rogier Quaedvlieg

Research Collection School Of Economics

This article proposes a test for the conditional superior predictive ability (CSPA) of a family of forecasting methods with respect to a benchmark. The test is functional in nature: under the null hypothesis, the benchmark’s conditional expected loss is no more than those of the competitors, uniformly across all conditioning states. By inverting the CSPA tests for a set of benchmarks, we obtain confidence sets for the uniformly most superior method. The econometric inference pertains to testing conditional moment inequalities for time series data with general serial dependence, and we justify its asymptotic validity using a uniform non-parametric inference method …

Geopolitics And Ballpark Estimates, Thomas Lam, David Fernandez

Sim Kee Boon Institute for Financial Economics

Most economist commenced 2022 with 3 key assumptions on the global economy:

1) Some policy normalisation and reversal, though cautious and uneven, are likely to occur in economies with above-average growth and inflation;

2) The Covid-19 infection wave, while presumably asymmetric and recurrent across countries, appears to have less of an imprint on cyclical activity on balance;

3) The lingering supply disruptions resulting from the pandemic, albeit still intense and widespread, should be easing gradually.

Skbi Big 5 Survey 2022 February, Singapore Management University

Sim Kee Boon Institute for Financial Economics

The latest survey results on the largest five economies (Big5), based on submissions prior to the ongoing Russia-Ukraine conflict, imply a more intricate growth, inflation and policy dynamic.

Part 1: Inflation, Uncertainty, And Volatility Undermine Virginia's Recovery, Dragas Center For Economic Analysis And Policy, Old Dominion University

State of the Commonwealth Reports

If the story of 2020 was the pandemic and the tale of 2021 was the recovery, then rising inflation and interest rates dominated the narrative of 2022. The economic recovery remained incomplete, with jobs returning to pre-pandemic levels but some Virginians remaining outside the labor force. Now, with the possibility of a recession in 2023 looming, we ask how Virginia fared over the last 12 months and what are the prospects for future growth?

An Empirical Examination Of The Impact Of Economic Structural Change On Income Inequality: Dynamic Heterogeneous Panel Approach, Maha Elhini, Rasha Hammam

Economics

This paper employs structural growth perspective to the analysis of income inequality in 43 countries over the period 2003-2017.The study utilizes two different panel estimation techniques. First, the panel least squares regression examines the relevance of Kuznets effect of the different economic sectors; agriculture, manufacturing and services on income inequality. Second, the pooled mean group (PMG) estimation of dynamic heterogeneous panels gauges the long run impact of the change in sectoral value added as a proxy for structural change on inequality. PMG presents short run adjustments to be country-specific due to the widely different impacts of macroeconomic conditions and vulnerability …

Skbi Big 5 Survey 2021 August, Singapore Management University

Sim Kee Boon Institute for Financial Economics

The latest survey results convey an upshift in growth projections of the five largest economies in aggregate accompanied by higher inflation, especially this year and to a lesser extent next year. The aggregate “Big5” median real GDP growth projections for 2021 and 2022 were raised to 6.7% (up in US, CN and EA but down in IN and JP) and 4.9% (all except US), respectively. The overall “Big5” median CPI inflation forecasts were nudged up to 2.6% (higher in US, IN and EA but lower in CN) and 2.4% (in US, IN and EA some), respectively, for this year and …

Squawking About Persistently Higher Inflation?, Thomas Lam

Sim Kee Boon Institute for Financial Economics

All signs point to an uncertain path for inflation in the future. While inflation is set to stay prospectively higher in the US in the near-term, it's unlikely to remain so.

Trade Policy As An Exogenous Shock: Focusing On The Specifics, Andrew Greenland, John W. Lopresti

Upjohn Institute Working Papers

This paper proposes a novel strategy for identifying the effects of import competition on economic outcomes that avoids standard concerns related to the endogeneity of trade policy and provides a consistent measure of exposure to trade over time. Conditioning on the level of import tariffs, our approach exploits cross-industry differences in the relative importance of specific rather than ad valorem tariffs. As they are expressed in per unit terms rather than as a share of value, the effective protection provided by a given specific tariff varies with price levels. Using digitized tariff line data between 1900 and 1940, we relate …

What Do Price Equations Say About Future Inflation?, Ray C. Fair

Cowles Foundation Discussion Papers

This paper uses an econometric approach to examine the inflation consequences of the American Rescue Plan Act of 2021. Price equations are estimated and used to forecast future inflation. The main results are: 1) The data suggest that price equations should be specified in level form rather than in first or second difference form. 2) There is some slight evidence of nonlinear demand effects on prices. 3) There is no evidence that demand effects have gotten smaller over time. 4) The stimulus from the act combined with large wealth effects from past household savings, rising stock prices, and rising housing …

Skbi Big 5 Survey 2021 February, Singapore Management University

Sim Kee Boon Institute for Financial Economics

The latest survey results suggest that the five largest economies collectively is projected to snapback to almost 6% in 2021, a modest upgrade from the August median, following an unprecedented preliminary contraction of roughly 4% last year (in real GDP terms). The 2022 median growth forecast of slightly above 4.5%, while slower, is still respectable, outstripping its pre-COVID 10-year average pace by more than half a percentage point. The aggregate upgrade in 2021, however, obscures the lopsided nature and highly uneven contour of the ongoing recovery. The bulk of the upward revision to growth was mainly due to IN (to …

2021-5 Lucas (1972), A Personal View From The Wrong Side Of The Subsequent Fifty Years, David Laidler

Department of Economics Research Reports

Lucas (1972) was a paper that permanently changed the course of macroeconomics, even though its “money supply surprise” model lost its central place in the area within a decade because of empirical difficulties. However, Lucas’s novel methodology, based on clearing markets and rational expectations, still dominates orthodox macroeconomic theorising. An unfortunate side effect of this has been that, because mainstream models have no analytic room for money to play a key role in economic activity, the theoretical case for taking that role seriously was undermined just at the time when traditional monetarist macro-models were facing empirical problems. The consequences of …

Stock Market Correlations To Economic Indicators, Anthony K. Quandt

Honors Theses

For this project, I researched how representative the S&P 500 (a common index of choice to represent the market) is of the economic well-being of the US. I found that stock market data can be used an as indicator of the economic well-being of the U.S.. The results do not indicate that the stock market leads to recovery, but it does suggest that it is correlated with recovery. In my analysis, I compared the S&P 500 performance to four different economic indicators: Real Gross Domestic Product (GDP), The Consumer Price Index (CPI), Average Weekly Private Wages, and Unemployment Rate. A …

Skbi Big 5 Survey 2020 August, Singapore Management University

Sim Kee Boon Institute for Financial Economics

The COVID-19 pandemic led to whopping downward revisions to 2020 real GDP growth among the Big5 economies, on average greater than 7%-points (ranging from roughly 3.5%-points for China to more than 10%-points for India). The forecast revisions to headline inflation were less sizable and more uneven, perhaps because of the confluence of supply and demand influences. The 2021 median GDP forecast is expected to turn positive overall, with a balanced risk assessment for most of the Big5 (but a coin toss in IN and US), but the growth reversal is likely to be highly uneven. While China regains its prior …

Skbi Big 5 Survey 2020 February, Singapore Management University

Sim Kee Boon Institute for Financial Economics

On balance, our overall read of the latest multiyear Big5 survey results implies the following economy-at-risk scale (least to most): India, US, Euro Area, Japan and China (i.e., India’s economy might be least at-risk, while China is deemed to be most at-risk). Broadly, survey participants expect the risk assessment to GDP growth to be skewed to the downside in 2020 followed by a more balanced backdrop in 2021. But participants seem to be more divided, with most responses favoring “downside” or/and “balanced” risks, on the 2022 growth environment. The risks to headline inflation in 2020, however, appear to be more …

Large Devaluations And Inflation Inequality: Evidence From Brazil, Raphael Rocha Gouvea

Economics Department Working Paper Series

In the aftermath of large devaluations, prices of tradable goods and lower-priced varieties increase significantly more than the prices of nontradables and higher-priced varieties. These relative price changes may lead to inflation inequality when household consumption baskets are different across the distribution of income. Using Cravino and Levchenko [2017]’s methodology, we show that inflation for poor households in Brazil was at least 11 percentage points higher than for rich ones in the aftermath of the 2002 large devaluation. A detailed case study of the City of São Paulo estimates an inflation inequality ranging from 8 to 11 percentage points in …

Skbi Big 5 Survey 2019 August, Singapore Management University

Sim Kee Boon Institute for Financial Economics

On balance, our overall interpretation of the multiyear Big5 survey results implies the following economy-at-risk scale (least to most): India, China, US, Japan and Euro Area (i.e., India’s economy appears to be the least at-risk, while the Euro Area might be the most at-risk). Broadly, survey participants expect the risks to GDP growth to be tilted to the downside in 2019 and 2020 followed by a more balanced growth environment in 2021. But participants seem to lean toward a more balanced risk assessment on headline inflation from 2019 through 2021, with the exception of the Euro Area, where a modest …