Economics Commons^™

The Harmonic Fisher Equation And The Inflationary Bias Of Real Uncertainty, Ioannis Karatzas, Martin Shubik, William D. Sudderth, John Geanakoplos

Cowles Foundation Discussion Papers

The classical Fisher equation asserts that in a nonstochastic economy, the inflation rate must equal the difference between the nominal and real interest rates. We extend this equation to a representative agent economy with real uncertainty in which the central bank sets the nominal rate of interest. The Fisher equation still holds, but with the rate of inflation replaced by the harmonic mean of the growth rate of money. Except for logarithmic utility, we show that on almost every path the long-run rate of inflation is strictly higher than it would be in the nonstochastic world obtained by replacing output …

Monetary-Policy Targeting In The Central European Transition Economies, Lucjan T. Orlowski

WCBT Faculty Publications

This chapter examines the monetary-policy-targeting systems, in the second half of the 1990s (until 1998), of three Central European EU-accession candidates—the Czech Republic, Hungary, and Poland--and advocates the potential benefits of applying a direct-inflation-targeting (DIT) system in them. For the purpose of the analysis presented here, DIT is defined as "a monetary policy framework that is based on the assumption of long-term price stability as the official policy goal and on the designation of the official inflation forecast as intermediate policy target" (Orlowski, 2000). Section 1 is a brief overview of monetary-targeting practices in the Czech Republic Hungary, and Poland. …

Economic Crisis In South East Asia : A Study Of Implications For Global Economy By Surendra S Yadav And P K Jain, Hindustan Publishing Corporation, Delhi, 2000., Pradeep Banerjee

IIMB Management Review

No abstract provided.

2002-3 Inflation Targets Versus International Monetary Integration: A Canadian Perspective, David Laidler

Economic Policy Research Institute. EPRI Working Papers

No abstract provided.

2002-07 Statutory Tax Burden And Its Avoidance In Transitional Russia, Vlad Ivanenko

Department of Economics Research Reports

No abstract provided.

Do Exchange Rate Regimes Affect Countries' Economic Growth And Inflation?, Yen Shern Chew

Honors Papers

The main focus of this paper is to answer the question of whether the exchange rate regime adopted by a country affects its economic growth (the measurement of output growth used is real per capita GDP growth) and inflation. There has been previous work done which looked at the same question; however, different authors have drawn different conclusions. As Levy-Yeyati and Sturzenegger (2002) point out, previous studies trying to relate exchange rate regimes to macroeconomic performance have only had relatively weak empirical findings. They attribute this to the possibility that the IMF's de jure classification, based on what regime countries …

How Do Forecasts Respond To Changes In Monetary Policy?, Laurence Ball, Dean D. Croushore

Economics Faculty Publications

Just as changes in atmospheric conditions affect weather forecasts, changes in monetary policy affect economic forecasts. When monetary policy shifts, forecasters change their predictions about growth and inflation. But does the economy change to the same extent that forecasts do? In this article, Laurence Ball and Dean Croushore examine forecasts from the Survey of Professional Forecasters to determine if forecasts and the economy respond in tandem or if there are significant differences.

Inflationary Bias In A Simple Stochastic Economy, Ioannis Karatzas, Martin Shubik, William D. Sudderth, John Geanakoplos

Cowles Foundation Discussion Papers

We construct explicit equilibria for strategic market games used to model an economy with fiat money, one nondurable commodity, countably many time- periods, and a continuum of agents. The total production of the commodity is a random variable that fluctuates from period to period. In each period, the agents receive equal endowments of the commodity, and sell them for cash in a market; their spending determines, endogenously, the price of the commodity. All agents have a common utility function, and seek to maximize their expected total discounted utility from consumption. Suppose an outside bank sets an interest rate rho for …

A Case Of The Philips Curve In The Formation Of A Monetary Union: A Glimpse At High Inflation Countries Of The European Monetary Union, Yuet Wen Wan

University Avenue Undergraduate Journal of Economics

This paper examines how disinflation in high inflation economies affects unemployment levels. According to Keynesian macroeconomic theories, a decrease in inflation will cause an increase in unemployment in the short run. Due to high inflation over the years among countries like Italy and Ireland, their expected inflation rate is significantly high. As a result, when the government starts a process of disinflation though restrictive fiscal and monetary policies, economic activity declines, and significant short run increase in unemployment follows.

Group Wage Curves, Timothy J. Bartik

Upjohn Institute Working Papers

Using panel data on U.S. MSAs, this paper estimates how a typical MSA's wages of different demographic groups, and prices, are affected by overall MSA unemployment, the distribution of unemployment among different groups, and national prices and wages. MSA unemployment has strong effects on MSA wages and prices, but the distribution of unemployment among different groups has weak effects on wages and prices. Using these estimates, simulations show that targeting high-unemployment groups for unemployment reductions will not reduce wage or price inflation pressures. The estimates also show that the effects of MSA unemployment on prices and disadvantaged groups' wages are …

2000-01 On Inflation As A Regressive Consumption Tax, Andres Erosa, Gustavo Ventura

Department of Economics Research Reports

No abstract provided.

The Dynamics Of The Hungarian Hyperinflation, 1945-6: A New Perspective, Peter Z. Grossman, János Horváth

Scholarship and Professional Work - Business

From late 1945 through the middle of 1946, Hungary experienced the most gigantic inflation of modern history. But in August 1946, the astronomical price increases stopped, and lasting price stability followed. Indeed, the contrast is so dramatic that it is viewed by some as an economic miracle surpassing even the post-war German Wirschaftswunder.

On the surface, the Hungarian hyperinflation, which witnessed a depreciation of the currency unit, the pengo of about 10-27, seems a kind of madness that raises two interlinked questions: First, how could such a fantastic destruction in the value of a currency take place, and second, what …

The Phillips Curve In The 1990s, Hayden Smith

University Avenue Undergraduate Journal of Economics

This paper will explore whether or not the Phillips curve relationship exists for the 1990s. I will attempt to estimate a Phillips curve for the past decade using data for the United States. In section two, I will explain the theory behind the Phillips curve and how the theory has evolved. In section three, I will present a literature review discussing previous research and results. Section four will present my empirical model and data. In section 5, I will present my results and discuss econometric problems such as serial correlation that may lead to biased estimates. In section six I …

Asset Price Inflation- Theory, History, And An Alternative Model, Christian Fitchett

Honors Papers

This paper takes a different approach by developing a model based on the boom and bust cycle of Japan during the mid to late 1980's, using currently accepted theory. In section II, I review the general characteristics of asset bubbles to familiarize the reader and offer some historical examples. Section III offers a review of many of the theoretical papers on asset bubbles, as well as empirical papers, which involve similar phenomena in order to gain some insight in building the model. In section IV, I build a theoretical model. Section V begins preliminary testing to examine this theory and …

Central Bank Of Nigeria Annual Report And Statement Of Accounts For The Year Ended 31st December 1999, Central Bank Of Nigeria

CBN Annual Report

The Annual Report contains details of Central Bank of Nigeria (CBN) financial activities during the 1999 accounting year in accordance with statutory requirement. During the period under review, the Bank carried out its core functions under CBN Decree No. 24, 1991, and the Banks and Other Financial Institutions (BOFI Decree No. 25, 1991). The CBN also performed developmental and technical assistance roles to contribute to economic development and capacity building. In 1999, the CBN carried out core functions, including issuance of currency notes and coins, maintaining Nigeria's external reserves, and promoting monetary stability. The Bank implemented policies to reduce excess …

The Fundamental And Non-Fundamental Components Of Stock Prices: The Role Of Time-Varying Expected Inflation, Maosen Zhong

Doctoral Dissertations

I derive testable implications of fundamental and non-fundamental components of stock prices. In order to control for the role of time-varying expected inflation and to be able to perform reasonable empirical tests, I use a nominal (rather than a real) interpretation of the present-value model (PVM), whereby nominal interest rates approximate expected inflation. I conjecture that the fundamental and non-fundamental components represent the permanent and temporary components of stock prices, respectively. A series of cointegration analysis over the annual period 1871–1997 confirms my conjecture for the model with time-varying expected inflation. Various fundamental and non-fundamental exclusion tests indicate that both …

Low Inflation: The Surprise Of The 1990s, Dean D. Croushore

Economics Faculty Publications

For most of the 1990s, forecasters have been predicting an upturn in inflation. Yet, over that same period, the United States has experienced stable or declining inflation. Why have forecasts been at odds with reality? And why does it matter? In this article, Dean Croushore considers some answers to these questions and explains why inflation is the economic surprise of the decade.

Economic Currents: The State Of The State Economy, Alan Clayton-Matthews

Public Policy and Public Affairs Faculty Publication Series

The Massachusetts economy continues to perform well, with high growth and low inflation. The question is, how long can this continue? In this issue we review the state's current economic performance. We also look at the financial crisis in Asia and the volatility in the stock market, which add some uncertainty to the outlook.

Money Supply, Inflation And The Nigerian Economy, Paul A. Ogwuma

Bullion

Experience in many countries, including Nigeria, show that fiscal policies, in particular, intended primarily to stimulate output growth and enhance real income often end up as a major source of financial imbalances and macro-economic instability. The accompanying high inflation has critical allocative and distributional implications that can be detrimental to the growth process. It is against this background that, this short paper attempts, to identify the relationship between monetary growth and inflationary developments in Nigeria and the implications for economic growth. Following this Introduction, Thus, the challenge of maintaining monetary stability has often been a difficult one, the world over, …

Further Empirical Analysis Of Inflation In Nigeria, O. M. Fakiyesi

Economic and Financial Review

This paper analyses the main factors which influence inflation in Nigeria with a view to determining the relevant policy instruments that will reduce it. The empirical analysis confirms the findings of earlier studies that monetary expansion significantly influences the rate of inflation in Nigeria. The other dominant factor is the exchange rate which has a significant and positive impact on inflation. Growth in real income and level of rainfall are also significant in explaining inflation in Nigeria.

The Long-Run Costs Of Moderate Inflation, Gregory Hess, Charles S. Morris

CMC Faculty Publications and Research

Long-run price stability is generally considered to be a primary goal of monetary policymakers in many countries. One reason policymakers care about inflation is that it can harm economic performance. Numerous studies of the impact of inflation on economic performance have focused on whether increases in inflation reduce economic growth in the long run (Barro, Fischer 1993, Bruno and Easterly, and Clark). These studies have found that prolonged high inflation does in fact reduce economic growth, but they were not able to detect a significant long-run relationship between real growth and low or moderate inflation. Because anti-inflationary policies typically have …

Growth-Inflation Tradeoff In China, Hiroyuki Imai

CAPS Working Paper Series

The high growth and wide fluctuations of fixed investment are the main driving forces of the rate of inflation in China in the reform period. Investment expansion generates strong demand pressures in the consumption goods market. Its inflationary impact is magnified further as it brings about higher wage costs during a boom. An implied short-run tradeoff is derived from dynamic simulation of a small macroeconomics model. In a given year, each additional percentage point of economic growth or investment growth leads to, respectively, a 2.7 or a 0.9 percent increase in the rate of inflation that year.

Central Bank Of Nigeria Annual Report And Statement Of Accounts For The Year Ended 31st December 1992., Central Bank Of Nigeria

CBN Annual Report

In 1992, Nigeria's economy faced significant pressures but showed resilience, with rapid growth in output and economic liquidity. The Central Bank of Nigeria (CBN) intensified efforts to achieve inflation and exchange rate stability while improving the efficiency of the financial sector. The financial sector experienced rapid growth and structural changes, with the strongest growth occurring in common unity banking and mortgage finance institutions. Monetary and credit aggregates expanded at unprecedented rates, matching the all-time highs of the oil boom era of the mid-seventies. Interest rates rose significantly, with both deposit and lending rates rising in tandem with the movements of …

An Econometric Analysis Of The Nature And Causes Of Inflation In Nigeria, J. O. Asogu

Economic and Financial Review

In this econometric revisitation of inflation in Nigeria, an extensive review of the literature and evidence has been attempted culminating in a specification of the various alternative hypotheses on the causes of inflation. While not ruling out the validity of several theories of inflation in the Nigerian situation, empirical evidence indicates that increases in real domestic produce or supply situation, especially food, and law cost of production of consumables, tended to ameliorate inflation. On the other hand, increases in government expenditure, especially deficits, tend to increase the money supply and worsen depreciation of the exchange rate, which in turn intensify …

Inflationary Expectations And Price Setting Behavior, Ray C. Fair

Cowles Foundation Discussion Papers

This paper tests for the existence of expectational effects in very disaggregate price equations. Price equations are estimated using monthly data for each of 40 products. The dynamic specification of the equations is also tested, including whether the equations should be specified in level form or in change form. Two expectational hypotheses are used, one in which expectations of the aggregate price level and one in which expectations are rational. Under the first hypothesis the lag length is estimated along with the other parameters, and under the second hypothesis the lead length is estimated along with the other parameters. The …

Sources Of Business Cycle Fluctuations, Matthew D. Shapiro, Mark W. Watson

Cowles Foundation Discussion Papers

What shocks account for the business cycle frequency and long run movements of output and prices? This paper addresses this question using the identifying assumption that only supply shocks, such as shocks to technology, oil prices, and labor supply affect output in the long run. Real and monetary aggregate demand shocks can affect output, but only in the short run. This assumption sufficiently restricts the reduced form of key macroeconomic variables to allow estimation of the shocks and their effect on output and price at all frequencies. Aggregate demand shocks account for about twenty to thirty percent of output fluctuations …

Inventories, Investment, Inflation And Taxes, James Tobin

Cowles Foundation Discussion Papers

Sales today were made possible by inputs of factor services and intermediate goods at various previous dates. Prices change between the input dates and the sale date. Especially in periods of general inflation, these price movements create ambiguities in the reckoning of profits. The accounting definition used in taxing profits can have significant economic effects. Tax accounting is generally not neutral vis-à-vis general inflation. Costing inputs at their historical nominal prices (FIFO) is a real burden and disincentive, greater the higher the inflation rate. It is analogous to depreciating durable capital at historical cost. However, it may be partially, completely, …

The Effect Of Economic Events On Votes For President: 1984 Update, Ray C. Fair

Cowles Foundation Discussion Papers

In previous work I have developed an equation explaining votes for president in the United States that seems to have a remarkable predictive ability. The purpose of this paper is to update this equation through the 1984 election and then use it to predict the 1988 election.

Economic Prospects For 1986, Murray L. Weidenbaum

Murray Weidenbaum Publications

The economic forecast for 1986 is expected to show a much more modest growth than that of 1984 and 1985, mostly due to increases in imports, causing a reduction in domestic production.

Does Inflation Tend To Perpetuate Itself? The Case Of Latin America, Ebrahim Harraf

All Graduate Theses and Dissertations, Spring 1920 to Summer 2023

The purpose of this study was threefold: (1) to test the existing theory which explains inflation as a result of its self-generating nature; (2) to investigate the contribution of foreign trade upon inflation; and (3) to test the casual relationship between the rate of inflation and the deficit. A system of four equations has been used to explain the relationship between the price level and the monetary expansion, between the rate of growth of the monetary base and the rate of the monetary expansion, the deficit and the monetary base, and, finally, between the deficit and the price level. As …