The Current State of Inflation Indexing in the Internal Revenue Code

In this study, the effects of inflation uncertainty to inflation, economic growth, real exchange rate and interest rate is investigated in the framework of BEKK-MGARCH and DCC-MGARCH models by using the 1987Q1–2013Q3 quarterly periods data in the perspective of Turkey’s economic structure. High inflation periods before 2003 and low inflation periods after 2003 was evaluated separately by means of slope dummy variable. The findings show that during both high and low inflation periods inflation uncertainty does not affect the exchange rate and has an increasing effect on inflation. Whereas, it is found that while the effect of inflation uncertainty on economic growth is positive during the periods of high inflation, its effect turns negative in low inflation periods Moreover, it is determined that inflation uncertainty has an reducing impact on interest rate in high inflation periods and its effects become positive in low inflation periods.

INTRODUCTION Toward the end of 2012, the popular press was awash with reports about the ‘‘fiscal cliff’’ and the efforts to avert it. A major aspect of this ‘‘cliff’’ was the expiration of many temporary tax provisions. Most of these tax laws had—temporarily?—reduced taxes for individuals and businesses. Thus, some politicians, lobbyists, and tax experts believed that they were contributing to the growing national deficit. However, for most of the expiring provisions, this was hardly the first time they faced expiration. Some have been extended so many times that taxpayers could be excused for believing they were permanent aspects of the tax code. During November of 2012, we conducted a comprehensive survey that asked Certified Public Accountants (‘‘CPAs’’) and other tax professionals to describe their opinions about the continuance of ‘‘temporary’’ provisions in the tax code. Our objective was to see if the multiple extensions of many of these temporary provisions have led CPAs (and their clients) to conclude that these provisions are to be treated as if permanent. Further, we wanted to know if the tax professionals’ opinion on these tax laws affects the advice they give to their clients. We find that in November of 2012, professionals, on average, believed that many provisions would be temporarily extended, but only few made permanent. This finding is not substantially different for responses received before versus after the 2012 elections (November 6, 2012). Since its last major overhaul in 1986, the Internal Revenue Code (‘‘IRC,’’ ‘‘tax code,’’ or ‘‘Code’’) has increasingly taken on a vast array of temporary provisions. Congress passed some of these provisions as temporary because they filled a need that was seen as temporary (such as an economic stimulus during an economic downturn). Other tax laws are, or were, temporary because there was no bipartisan support for a more permanent tax code change (such as the Bush era tax rate changes and the elimination of the estate tax for the year 2010 with a ‘‘sunset’’ provision). Regardless of the reason why these provisions were adopted into the Code ‘‘temporarily,’’ lawmakers have extended many of them multiple times. Furthermore, the Code includes various sections that tax professionals and politicians generally acknowledge as being outdated (such as the alternative minimum tax, ‘‘AMT’’) or in need of inflation adjustment, but without bipartisan

Periods of high inflation generally cause uncertainty and risks in financial markets. In Turkey, the 2017-2023 period covers a time period characterized by frequent economic and financial fluctuations. High inflation in this period affected many sectors in the country and created significant volatility in financial markets. BIST sector indices were also affected by this economic environment and exhibited different volatile performances. In particular, sectors such as energy, food and beverages are generally more affected by inflation, while sectors such as services and technology have adapted more flexibly to economic fluctuations. In this study, BIST Sector Indices: Food and Beverages, Electricity, Tourism and Technology indices over time (2017-2023), i.e., high and low return periods, a univariate Markov Regime Switching (MRS) model is estimated. According to the findings, the Food and Beverages index is stable in a particular market regime for a long period of time and has a high probability of remaining in that regime once it is switched. For the Electricity index, the index tends to remain in a particular market regime for a long time and can adapt quickly to changes in the market. During periods of high inflation, the BIST-Tourism Index exhibited long-term stability and the low volatility period covered a large period of time. This suggests that the tourism sector is resilient to economic uncertainties and is more suitable for long-term planning. For the BIST-Technology Index, it is understood that there is a long period of stability in a particular market regime and the period of low volatility lasts almost as long as the period of high volatility. This suggests that the technology sector is resilient to economic uncertainties and maintains its long-term stability. The contribution of this study to the literature is that it reveals sector-specific long-term stability and volatility characteristics to analyze the fluctuations of BIST sectoral indices during periods of high inflation. It provides investors with important information about the different performance characteristics across sectors, allowing them to formulate more effective strategies.

The price adjustment hazard function: Evidence from high inflation periods

Domestic and international investors are interested in introducing their brands in Pakistan, the question is whether period of high inflation is suitable for introducing new brand in Pakistan. This study learned the consumer behavior during extremely high inflation period in Pakistan. The study conducted in Karachi, financial hub of the country. As population of Pakistan consisted of mainly three income classes, that are upper, middle and lower, the study selected randomly 100 consumers from each class of consumers. The descriptive statistics discovered that inflation caused a compromising change in behavior of consumers from the lower class, the study found a considerable change in terms of the buying capacity as well as selection of the brand among consumers from lower income class. The study further found little change in both these dimensions among the consumers from the middle class. However, the study did not find any large change in the behavior of the consumers from the upper class. It concludes that income level is the real determinant of consumer behavior while inflation is merely a catalyst. Based on such findings, the study contributed that period of high inflation in Pakistan is suitable for promoting new local brands providing economy in the markets where majority of the consumers come from middle and lower classes of income.

The purpose of the article. Since the 1990s, central banks have become more transparent about their monetary policy. The meaning of the communication was amplified by the global financial crisis, when central banks began to use non-standard monetary policy instruments on a broader scale. Further changes resulted from the COVID-19 pandemic and the period of high inflation, which lasted several months afterwards. The article aims to present and analyse the measures taken by the Federal Reserve System (FED) and the European Central Bank (ECB) during the pandemic crisis and the period of high inflation. Methodology. The monetary policy instruments used by both central banks from 2020 to 2025, as well as the statements made by Jerome Powell (Chair of the Board of Governors of the FED) and Christine Lagarde (President of the ECB), were presented. The article also presents various opinions on the measures taken by both central banks, published in the press and the literature. Results of the research. The results indicate that monetary policy instruments, used by both central banks, allowed them to mitigate the effects of the economic disruptions caused by the COVID-19 pandemic. However, after the pandemic crisis, both central banks had to raise interest rates and pursue a policy of Quantitative Tightening. The crises also highlighted the importance of communication policy. Although the actions taken by both central banks were the subject of criticism, the measures taken by the FED were considered successful, and the measures taken by the ECB allowed for mitigating the direct consequences of the high inflation.

Empirical data show that real wages fall sharply during periods of high inflation. This paper suggests a simple general equilibrium explanation, without relying on nominal rigidities. It presents an intertemporal two-sector model with a cash-in-advance constraint. In this setting, inflation reduces real wages through (1) a decline of the capital stock, and (2) a shift in relative prices. The two effects are additive and make the decline in real wages exceed the decline in per-capita GDP. This mechanism may contribute to rising poverty during periods of high inflation.

Empirical data show that real wages fall sharply during periods of high inflation. This paper suggests a simple general equilibrium explanation, without relying on nominal rigidities. It presents an intertemporal two-sector model with a cash-in-advance constraint. In this setting, inflation reduces real wages through (1) a decline of the capital stock, and (2) a shift in relative prices. The two effects are additive and make the decline in real wages exceed the decline in per-capita GDP. This mechanism may contribute to rising poverty during periods of high inflation.

Empirical data show that real wages fall sharply during periods of high inflation. This paper suggests a simple general equilibrium explanation, without relying on nominal rigidities. It presents an intertemporal two-sector model with a cash-in-advance constraint. In this setting, inflation reduces real wages through (1) a decline of the capital stock, and (2) a shift in relative prices. The two effects are additive and make the decline in real wages exceed the decline in per-capita GDP. This mechanism may contribute to rising poverty during periods of high inflation.

Inflation, public attention allocation, and psychological distance to climate change

The article describes the rise of unmarried cohabitation in Latin American countries during the last 30 years of the twentieth century, both at the national and regional levels. It documents that this major increase occurred in regions with and without traditional forms of cohabitation alike. In addition, the striking degree of catching up of cohabitation among the better-educated population segments is illustrated. The connections between these trends and economic (periods of high inflation) and cultural (reduction of stigmas in ethical domains) factors are discussed. The conclusion is that the periods of inflation and hyperinflation may have been general catalysts, but no clear indications of correlation were found between such economic factors and the rise in cohabitation. The shift toward more tolerance for hitherto stigmatized forms of conduct (e.g., homosexuality, euthanasia, abortion, singleparent household) is in line with the rise of cohabitation in regions of Argentina, Chile, and Brazil where cohabitation used to be uncommon. Further rises in cohabitation during the first decade of the twenty-first century are expected in a number of countries (e.g., mexico) despite conditions of much lower inflation.

The growing empirical literature documents evidence on increasing global inflation co-movement across countries over time; however, little is known about the quantile co-movement structure of inflation. By introducing quantile factor model for a global sample of 151 countries from 1970 to 2023, this study provides new insights with respect to inflation co-movement. The quantile factor analysis sheds light on that (i) global inflation has a quantile-dependent factor structure, with different behavior in low, mild/stable, and high inflation periods; (ii) inflation shows an asymmetric co-movement pattern, with a decreasing degree in low and high inflation periods in comparison with stable inflation period; (iii) while interest rate and economic activity are the underlying observables for the latent quantile factors in low and stable inflation periods, commodity prices also become an underlying observable in high inflation period; and finally (iv) using quantile factors is nontrivial in improving density forecast of inflation in both developed and emerging markets.

Inflation, capital markets and the supply of beef

This paper puts forward an explanation for the negative elasticity of supply of beef found in many LDC's. As is explained by Jarvis (1974), the elasticity of supply of beef may be negative in the short run due to the dual role of cattle as both a capital and a consumption good. But in some LDC's, and especially in Latin America, one may find a long‐run negative association between slaughter and prices, that cannot be explained by assuming shocks to slaughter are causing changes in prices. It is no coincidence that Jarvis' hypothesis itself was developed to explain developments in Argentina, a country with chronic high inflation. The paper argues that this long‐run relationship cannot be explained by the Jarvis hypothesis, and offers an alternative hypothesis based on the demand for cattle as a hedge against inflation.The long‐run negative association between slaughter and prices has been found in high inflation countries. High inflation combined with excessive regulation of capital markets cause the well known phenomenon of desintermediation. It is argued here that cattle plays a role in the inflation hedged portfolio that is then demanded. Therefore, with imperfect capital markets the supply of beef is affected by the demand for cattle as an asset, and this demand, in turn, is affected by inflation. This paper will only attempt to prove the link between imperfect capital markets and the supply of beef. The way inflation in a repressed capital market leads to an imperfect capital market is not addressed here, for reasons of brevity. The paper will develop a model that in the context of imperfect capital markets results in a negative elasticity of supply. The model will then be tested with Uruguayan data. Uruguayan data are very adequate to test the hypothesis because they cover both a period without inflation and a period of high inflation. The results support that cattle was used as an alternative to money holdings when inflation signified a big tax on the latter. Inflation therefore affected the demand for cattle, or, conversely, the supply of beef.

This paper investigates the effectiveness of monetary policy in Turkey, i.e. a developing country with high inflation, through its impact on the local currency denominated sovereign yield curve. Employing a two-factor, market-based methodology and introducing a new dataset, the study calculates the surprise factor for both actions (monetary policy surprise) and words (communication surprise). Checking their impacts separately, the study finds evidence that the communication provided by the Central Bank of Turkey through Monetary Policy Committee Statements help to extend the impact of the monetary policy to the long end of the yield curve, even during periods of high inflation.