Economics Commons^™

The More Divergent, The Better? Lessons On Trilemma Policies And Crises For Asia, Joshua Aizenman, Hiro Ito

Economics Faculty Publications and Presentations

This paper investigates the potential impacts of the degree of divergence in open macroeconomic policies in the context of the trilemma hypothesis. Using an index that measures the extent of policy divergence among the three trilemma policy choices—monetary independence, exchange rate stability, and financial openness—we find that emerging market economies have adopted trilemma policy combinations with the smallest degree of policy divergence in the last 15 years. We then investigate whether and to what extent the degree of open macro policy convergence affects the probability of a crisis and find that a developing or emerging market economy with a higher …

International Reserves Before And After The Global Crisis: Is There No End To Hoarding?, Joshua Aizenman, Yin-Wong Cheung, Hiro Ito

Economics Faculty Publications and Presentations

We evaluate the global financial crisis (GFC) and the structural changes of recent years that have been associated with new patterns of hoarding international reserves. We confirm that the determining factors of international reserves are evolving with developments in the global economy. From 1999–2006, the pre-GFC period, gross saving is associated with higher international reserves in developing and emerging markets. An outward direct-investment effect is consistent with the view of diverting international assets from the international reserve account, the “Joneses’ effect” lends support to the rivalry hoarding motivation, and commodity price volatility induces hoarding against uncertainty. During the 2007–2009 GFC, …

Discounting The Distant Future, J. Doyne Farmer, John Geanakoplos, Jaume Masoliver, Miquel Montero

Cowles Foundation Discussion Papers

If the historical average annual real interest rate is m > 0, and if the world is stationary, should consumption in the distant future be discounted at the rate of m per year? Suppose the annual real interest rate r ( t ) reverts to m according to the Ornstein Uhlenbeck (OU) continuous time process dr ( t ) = α[ m – r ( t )] dt + kdw ( t ), where w is a standard Wiener process. Then we prove that the long run rate of interest is r ∞ = m – k 2 /2α 2 . …

The Relationships Of Inflationary Trend, Agricultural Productivity And Economic Growth In Nigeria, Oyakhilomen Oyinbo, Grace Z. Rekwot

CBN Journal of Applied Statistics (JAS)

This study investigates the links existing between inflationary trend, agricultural productivity and economic growth in Nigeria using time series data spanning from 1970 to 2011. The results of the analyses indicate a unidirectional causality from inflationary trend to agricultural productivity, unidirectional causality from agricultural productivity to economic growth with no causality between inflationary trend and economic growth. Based on these findings, it is recommended that the Central Bank of Nigeria should pay more attention to the trend of inflation and pursue policies that will ensure single digit inflation.

Heterogeneous Effects Of Commodity Price Shocks On Inflation Rates. Evidence From A Panel Study., Odbayar Batmunkh

Master's Theses

Do commodity price shocks have heterogeneous effect on countries based on their export and import profiles? I address this question through a panel study of 142 countries using Export and Import Indexes aimed at differentiating the retail pass-through and fiscal balance channel of transmission of Commodity Price shocks on inflation. The results show that an increase in the Export Index leads to a decrease in contemporary inflation while an increase in the Import Index leads to an increase in inflation in the next year. Average causal mediating effect of the Export Index on Inflation through the Fiscal Balance was shown …

An Examination Of The Structural Inflation Dynamics In Nigeria, O. J. Odonye, S. O. Odeniran, A. O. Oduyemi, O. J. Olaoye, K. J. Ajayi

Economic and Financial Review

This study examines the dynamics of inflation in Nigeria, including the structural evolution as well as the direction of its movement with a view to designing appropriate policy measures to rein in the inflationary pressures. The study utilized quarterly data from 1970(1) to 2013 (4) except for Bureau de Change (BDC) premium where the duration was 1991(1) to 2013 (4) based on Auto Regressive Distributed Lag (ARDL) model. The results show that structural factors like budget deficit, rainfall, variation in export, exchange rate premium have profound influence on movement in CPI in Nigeria during the period.

Inflation And Inflation-Uncertainty In India: The Policy Implications Of The Relationship, Abdur Chowdhury

Economics Faculty Research and Publications

Purpose – Inflation and its related uncertainty can impose costs on real economic output in any economy. This paper aims to analyze the relationship between inflation and inflation uncertainty in India.

Design/methodology/approach – The methodology uses a generalized autoregressive conditional heteroscedasticity (GARCH) model and Granger Causality test.

Findings – Initial estimates show the inflation rate to be a stationary process. The maximum likelihood estimates from the GARCH model reveal strong support for the presence of a positive relationship between the level of inflation and its uncertainty. The Granger causality results indicate a feedback between inflation and uncertainty.

Research limitations/implications – …

The Friedman Rule And The Zero Lower Bound, Sebastien Buttet, Udayan Roy

Publications and Research

We explain why central banks rarely implement the Friedman rule by studying the properties of a simple New Keynesian dynamic macroeconomic model that is generalized to incorporate the zero lower bound on nominal interest rates. We show that two long-run equilibria exist, one stable and the other unstable, and we characterize the conditions under which the economy plunges into a deflation-induced depression following a contractionary demand shock. As long as the sum of the inflation rate and the natural real interest rate stays positive, the economy converges back to the long-run stable equilibrium, even when the zero lower bound is …

Fuel Subsidy And Other Unproductive Public Expenditures Removal: A Pragmatic Approach To Restructure And Transform The Nigerian Economy, Lawrence O. Akinboyo

Bullion

While the short term measures to reduce recurrent expenditure are necessary conditions for fiscal sustainability, the long term imperative is to increase revenue. Thus, efforts should be made by the fiscal authorities in Nigeria to pursue the policy of balancing of expenditure with revenue improvements. The issues of the underperformance of the capital budget should be reversed before savings from cuts in recurrent expenditure can be diverted to the financing of capital expenditure. From the analysis, we say that removal of fuel subsidy would no doubt have some social and economic hardship on the people in the short run, However, …

2013-4 Three Revolutions In Macroeconomics: Their Nature And Influence, David Laidler

Economic Policy Research Institute. EPRI Working Papers

No abstract provided.

2013-2 The Fisher Relation In The Great Depression And The Great Recession, David Laidler

Economic Policy Research Institute. EPRI Working Papers

No abstract provided.

Money And Asset Prices With Uninsurable Risks, Nicolas L. Jacquet, Serene Tan

Research Collection School Of Economics

We develop a model where the coexistence of money and a higher yielding asset is endogenously obtained when no restriction is placed on the use of either object as a medium of exchange. Due to the presence of uninsurable risks, agents have, in equilibrium, di⁄erent relative valuations of the asset to money, and hence, the use of money as a means of payment is strictly preferred. This endogenous di⁄erence in the willingness of agents to use money over the asset implies that money carries a greater liquidity premium than the asset. We obtain that the asset strictly dominates money in …

Singapore Inflation Expectations: Expecting The Unexpected, Aurobindo Ghosh, Jun Yu

Research Collection School Of Economics

The study of inflation expectations of Singapore house-holds is a multi-disciplinary industry-relevant research that comes out of a partnership between Singapore Management University (SMU) and MasterCard. The research team for this MasterCard-SKBI Singapore Index of Inflation Expectations (SInDEx) project applied rigorous methods using current internet-based marketing survey tools for data-collection and advanced econometric techniques to analyse the data. The updates from the quarterly waves are keenly followed by policymakers, market watchers and the media because of the enormous importance of cost of living to individuals and businesses alike.

Dynamic Poverty Decomposition Analysis: An Application To The Philippines, Tomoki Fujii

Research Collection School Of Economics

In this paper, we propose a new method of poverty decomposition. Our method remedies the shortcomings of existing methods and has some desirable properties such as time-reversion consistency and subperiod additivity. It integrates the existing methods of growth-redistribution decomposition and sector-based decomposition, because it allows us to decompose poverty change into growth and redistribution components for each group (e.g. regions or sectors) in the economy. We extend our method to have six components and provide an empirical application to the Philippines for the period 1985-2009.

Essays In Inflation And Monetary Dynamics In Developing Countries, Simon K. Harvey

College of Business: Dissertations, Theses, and Student Research

This dissertation is consists of three essays. In the first essay, I analyze how the information contained in the disaggregate components of aggregate inflation helps improve the forecasts of the aggregate series using inflation data from Ghana. Direct univariate forecasting of the aggregate inflation data by an autoregressive (AR) model is used as the benchmark with which all autoregressive (AR), moving average (MA) and vector autoregressive (VAR) models of the disaggregates are compared. The results show that directly forecasting the aggregate series from the benchmark model is generally superior to aggregating forecasts from the disaggregate components. Additionally, including information from …

Threshold Effect Of Inflation On Economic Growth In Nigeria, Sani Bawa, Abdullahi S. Ismaila

CBN Journal of Applied Statistics (JAS)

It is widely believed that price stability promote long-term economic growth, whereas high inflation is inimical to growth. This paper utilized a quarterly time series data for the period 1981 – 2009 to estimate a threshold level of inflation for Nigeria. Using a threshold regression model developed by Khan and Senhadji (2001), the study estimated a threshold inflation level of 13 per cent for Nigeria. Below the threshold level, inflation has a mild effect on economic activities, while above it, the magnitude of the negative effect of inflation on growth was high. The negative and significant relationship between inflation and …

Why We Don't Need To Worry About Inflation, Louis D. Johnston

Economics Faculty Publications

No abstract provided.

Oil Price Pass-Through Into Inflation: Empirical Evidence From Nigeria, Adeniyi O. Adenuga, Margaret J. Hilili, Osaretin O. Evbuomwan

Economic and Financial Review

The objective of the paper is to empirically investigate the oil price pass-through into inflation in Nigeria in order to suggest appropriate domestic policies necessary to control inflation for the policy makers. The study also attempts to answer questions like: What is the causal links between oil price and inflation in Nigeria? Is oil price highly correlated with inflation? What does the result of an estimation of a Phillips curve tell us about the pass-through for oil in Nigeria. The methodology adopted by the paper is a standard pass-through equation in the form of an autoregressive distributed lag (ARDL) model …

2012-4 Two Crises, Two Ideas And One Question, David Laidler

Economic Policy Research Institute. EPRI Working Papers

No abstract provided.

2012-2 Milton Friedman's Contributions To Macroeconomics And Their Influence, David Laidler

Economic Policy Research Institute. EPRI Working Papers

No abstract provided.

Forecasting Inflation In Asian Economies, Freddy Chian Fatt Liew

Dissertations and Theses Collection (Open Access)

This paper surveys the recent literature on inflation forecasting and conducts an extensive empirical analysis on forecasting inflation in Singapore, Japan, South Korea and Hong Kong paying particular attention to whether the inflation-markup theory can help to forecast inflation. We first review the relative performance of different predictors in forecasting h-quarter ahead inflation using single equations. These models include the autoregressive model and bivariate Philips curve models. The predictors are selected from business activity, financial activity, trade activity, labour market, interest rate market, money market, exchange rate market and global commodity market variables. We then evaluate a vector autoregressive inflation-markup …

Singapore Consumer’S Inflation Expectations And Creation Of Singapore Index Of Inflation Expectations, Aurobindo Ghosh, Jun Yu

Research Collection School Of Economics

The aim of this report is to highlight a broad spectrum of issues that brings about the measurement of the disagreement and the uncertainity and the formation of inflation expectations among economic agents in Singapore.

On The Nonlinear Causality Between Inflation And Its Uncertainty In G-3 Countries, Esin Cakan, Zeynel Abidin Ozdemir, Mehmet Balcilar

Economics & Business Analytics Faculty Publications

This study examines the dynamic relationship between monthly inflation and inflation uncertainty in Japan, the US and the UK by employing linear and nonlinear Granger causality tests for the 1957:01-2006:10 period. Using a generalised autoregressive conditional heteroskedasticity (GARCH) model to generate a measure of inflation uncertainty, the empirical evidence from the linear and nonlinear Granger causality tests indicate a bi-directional causality between the series. The estimates from both the linear vector autoregressive (VAR) and nonparametric regression models show that higher inflation rates lead to greater inflation uncertainty for all countries as predicted by Friedman (1977). Although VAR estimates imply no …

What Do Indexes Of Consumer Confidence Tell Us?, Marta Lachowska

Employment Research Newsletter

No abstract provided.

A Kalman Filter Approach To Fisher Effect: Evidence From Nigeria, Omorogbe J. Asemota, Dahiru A. Bala

CBN Journal of Applied Statistics (JAS)

This paper investigates evidence of a Fisher effect in Nigeria by employing quarterly CPI inflation and Nominal interest rates data. For a more robust result we conducted integration and cointegration tests in order to examine time-series properties of the variables. Using Co-integration and Kalman filter methodologies, the study did not find evidence of a full Fisher effect from 1961:1-2009:4. This result indicates that nominal interest rates do not respond one-for-one to changes in inflation rates in the long run despite the presence of positive relationship among the variables. Our study recommends the adoption of potent policies aimed at checking inflation …

Money And Inflation: Evaluating The Effectiveness Of Monetary Policy In Nigeria, Mbutor O. Mbutor, Okafor Ifeanyi Izuchukwu, Ameh Oguche Sunday

Bullion

The paper establishes the relationship between monetary policy and inflation.

(Wp 2011-04) Inflation And Inflation-Uncertainty In India: The Policy Implications Of The Relationship, Abdur Chowdhury

Economics Working Papers

Inflation and its related uncertainty can impose costs on real economic output in any economy. This paper analyzes the relationship between inflation and inflation uncertainty in India. Initial estimates show the inflation rate to be a stationary process. The maximum likelihood estimates from the GARCH model reveal strong support for the presence of a positive relationship between the level of inflation and its uncertainty. The Granger causality results indicate a feedback between inflation and uncertainty. With Granger causality running both ways, the Friedman-Ball and Cukierman-Meltzer hypotheses hold simultaneously in India. It provides strong support to the notion of an opportunistic …

2011-1 Professor Fisher And The Quantity Theory - A Significant Encounter, David Laidler

Department of Economics Research Reports

No abstract provided.

Is The Philips Curve Useful For Monetary Policy In Nigeria, Carlos J. Garcia

CBN Occasional Papers

The objective of this article is to determine if the Phillips curve is a relevant tool to conduct monetary policy in African countries wishing to adopt an inflation-targeting regime. I choose Nigeria as a case of study because it is in the early stage of the implementation of this regime. I estimate a medium-sized model for monetary policy analysis. The model reflects a synthesis between the New Keynesian and the Real Business Cycle (RBC) approaches. Then I estimate the model by using Bayesian econometric technique in order to overcome the shortage of data availability. The study concludes that there is …

Relationship Between Inflation And Stock Market Returns: Evidence From Nigeria, Omotor G. Douglason

CBN Journal of Applied Statistics (JAS)

The linkage between stock prices and inflation has been subjected to extensive research in the past decades and has arouse the interests of academics, researchers, practitioners and policy makers globally, particularly since the 1990s. The issue has been the apparent anomaly of the negative relationship between inflation and stock market returns as most studies in the industrialized economies have shown. This paper investigates this relationship using monthly and quarterly data of Nigeria for the period 1985 to 2008. The findings of this paper seem to suggest that stock market returns may provide an effective hedge against inflation in Nigeria.