Anticipated Rate Of Inflation Research Articles

Do Expectations Play Any Role in Determining Pak Rupee Exchange Rates?

This paper presents some evidence on the role of expectations in the determination of Pak rupee exchange rates vis-à-vis the dollar, pound, and yen over the period 1982:1– 1993:7. Results of cointegration and coefficient restriction tests in two out of three cases are supportive of the view of exchange rate determination in postulating that in efficient markets in which uncertainty and expectations about the future are dominant, the equilibrium nominal exchange rate is determined not only by current relative prices but also by the expected real exchange rate. These results are supportive of ex ante purchasing power parity, implying that the real exchange rate follows a random walk. These results also suggest that the anticipated inflation rate is higher in Pakistan than in other countries, which tends to encourage the domestic residents to convert their current balances into foreign currency, so that the terms of trade deteriorate and offset much of gains of the continuous devaluation of Pak rupee by undermining external competitiveness.

Optimization of hydrogen-producing sustainable island microgrids

Hydrogen-based microgrids are receiving attention as critical pathways are being charted for the decarbonization of our thermal, transport, and power grids. In this article, clean, cost-effective, and reliable hybrid microgrid designs are developed to satisfy hydrogen and electricity loads in three energy-stressed islands of Eastern Canada, namely Pelee, Wolfe, and Saint Pierre. The design iterations incorporate elements of solar, wind, fuel cells, Hydrogen, and electricity storage. Real-time field irradiation, wind speed, ambient temperature, and load data over 8760 h have been used to drive the designs. Although the anticipated inflation rate in Newfoundland is higher than in Ontario, the lowest net present cost (NPC) of the hybrid solution is found in Saint Pierre Island. The hydrogen cost, in this case, is $7.5/kgH 2 and $15.8/kgH 2 lower than that of Pelee and Wolfe islands, respectively. The maximum H 2 tank capacity (≥680 kgH 2 ) on Pelee Island is 3000 h/yr and 1000 h/yr lower than optimal cases in Saint Pierre and Wolf Islands, respectively. LCOE is more sensitive to market changes in fuel cell costs than other components. The highest LCOE reduction (∼63%) is observed when the optimal case in Pelee Island increases its lifetime. Analyzing the volatility in resource assessment indicates that predicting the energy cost over a short-term project is challenging. The salvage share in the long-term project is more than that of the short-term, indicating that the long-term project can be more cost-effective taken overall. • Feasibility analysis of renewables in refuelling station and residential buildings of Pelee, Wolfe, and Saint Pierre Islands. • Simultaneous production of Hydrogen and electricity production via renewables is economically and technically feasible. • The lowest value of energy and Hydrogen cost are obtained in Saint Pierre Island. • The energy cost over a short-term project is challenging and less profitable than a long-term project.

Inflation and relative price volatility in Russian food markets

Real costs result when inflation changes relative prices between products or regions. When such changes are unanticipated, resource misallocation and welfare losses are induced. Time series analysis of retail food prices in Russian markets provides estimates of anticipated and unanticipated inflation, as well as of inflation uncertainty derived from a GARCH-M model. Results indicate that distortions in relative prices were induced by the anticipated inflation rate, rather than by unanticipated inflation or a measure of inflation uncertainty. No support was found for the Lucas hypothesis that a positive relationship exists between the relative price structure and the unanticipated rate of inflation. Copyright 1998 by Oxford University Press.

Some implications of the natural rate hypotheses

Changes in the anticipated and actual levels of inflation change the incentive to hold monetary and nonmonetary assets. We present a model with a production sector and markets for labor, capital, bonds, and money. The response of the model to changes in the anticipated inflation rate is derived. Restrictions implied by the various natural rate hypotheses are discussed. An asymmetry in the response of the economy to anticipated inflation and deflation makes the natural rate conditions more plausible for inflationary as opposed to deflationary equilibria. A new version of the liquidity trap is suggested by the analysis.

INFLATION AND GOVERNMENT DEFICITS

There is a pronounced positive correlation of inflation andgovernment deficits in the United States since World War II.The purpose of this paper is to test the three leading explanationsof this correlation. These three explanations are: (a) a deficitincreases prices through a wealth effect; (b) a deficit results inthe Federal Reserve purchasing debt, thus increasing the moneysupply and prices; and (c) expected inflation increases the deficit(which is the change in the nominal value of bonds). No supportis found for either of the first two hypotheses. The results indi-cate that expected government deficits have no significance forfuture inflation.Since World War II, the United States has experienced large federal-government deficits and a sustained peacetime inflation. Three differentconnections between the deficits and inflation are prominent in theliterature.The most direct connection between government deficits and inflationis that by increasing the real value of outstanding bonds and perceived netwealth, a deficit can raise total spending and the price level. This connec-tion is also the most long-standing and is suggested by Metzler (1951) andPatinkin (1965) for example.Monetarists generally and Buchanan and Wagner (1977) in particularhave emphasized a different link between deficits and inflation. They sug-gest that the Federal Reserve purchases government bonds when the Trea-sury sells bonds, thus increasing high-powered money, the money supply,and the price level. The Federal Reserve might behave this way, for exam-ple, because it is attempting to hold down interest rates on governmentsecurities when deficits occur.Recently, Barro (1978, 1979) has put forward a hypothesis that deficitsare a result of inflation, rather than inflation being a result of deficits. Thegovernment deficit is the change in the nominal value of outstanding gov-ernment bonds. If the anticipated inflation rate increases, then the nomi-nal value of bonds must increase, i.e., the government will run a deficit, tokeep the same anticipated real amount of bonds.All three of these possible connections between government deficitsand inflation are consistent with the observed positive correlation of defi-cits and inflation. The implications, however, are strikingly different con-

Federal Deficit Policy and the Effects of Public Debt Shocks

Shifts between current taxation and debt issue alter the timing of taxes, which induces a variety of intertemporal substitution effects. In some circumstances the minimization of excess budget costs would entail stabilization of expected overall tax rates over time. The first section of the paper discusses this condition and derives its implications for the behavior of public debt. Empirically the major movements in U.S. public debt can be explained along the lines of the theoretical model as sensible responses to business fluctuations, changes in government expenditures, and variations in the anticipated inflation rate. In particular, much of federal deficit appears to be consistent with economic efficiency. The next section focuses on the economic effects of debt shocks, which are interpreted as departures of public debt movements from the systematic behavior that was investigated in the previous section. It is possible theoretically that these shocks could influence aggregate demand even when such effects did not arise from the systematic behavior of the deficit. The constructed debt shocks appear to have expansionary influences on output and negative effects on the unemployment rate, although the magnitudes of the effects that have been isolated are substantially weaker than those estimated for money shocks. Because it is the shock component of deficits -- rather than the systematic policy response -- that has been shown to affect real economic activity, the results do not provide a basis for using the deficit as an element of activist stabilization policy. Overall, the results do not suggest much payoff from the imposition of restrictions on federal deficit behavior; it Is likely that such constraints would mainly increase the excess burden that is imposed on the private sector by financing of government expenditures.

Price Expectations and Interest Rates: Some Clarifying Comments: Comment

Proposition I Under Patinkin's assumptions on the money market [2, p. 491], assume that commodity demand responds only to changes in real interest rates (i.e., equal changes in nominal interest rates and the anticipated inflation rate, everything else held constant, will leave commodity demand unchanged). Then a reduced real demand for money (from an increase in the anticipated inflation rate) is accomodated exclusively by a shift in the excess demand function for bonds. Commodity market equilibrium at a fixed level of real output YO can be expressed, following Patinkin, as