Core CPI Research Articles

Advanced Geostatistical Techniques for Building 3D Geological Modeling: A Case Study from Cretaceous Reservoir in Bai Hassan Oil Field

A 3D Geological model was generated using an advanced geostatistical method for the Cretaceous reservoir in the Bai Hassan oil field. In this study, a 3D geological model was built based on data from four wells for the petrophysical property distribution of permeability, porosity, water saturation, and NTG by using Petrel 2021 software. The geological model was divided into a structural model and a property model. The geological structures of the cretaceous reservoir in the Bai Hassan oil field represent elongated anticline folds with two faults, which had been clarified in the 3D Structural model. Thirteen formations represent the Cretaceous reservoir which includes (Shiranish, Mashurah, U.kometan, Kometan Shale, L. Kometan, Gulneni, Dokan, Mauddud, Jawan/Mud, Batiwah, Shuaiba, Garagu, L.Sarmord). According to the property model, the model for each petrophysical property was constructed based on core data and CPI. By using the geostatistical method, the property model was constructed. The Mauddud Formation is considered one of the most promising hydrocarbon reservoirs in the Bai Hassan oil field based on the results of the property model, where the ratio of water saturation is around 30%, the porosity value is reaching up to 31%, and the net to gross ratio is averaging at 70%.

A broader perspective on the inflationary effects of energy price shocks

Consumers purchase energy in many forms. Sometimes energy goods are consumed directly, for instance, in the form of gasoline used to operate a vehicle, electricity to light a home, or natural gas to heat a home. At other times, the cost of energy is embodied in the prices of goods and services that consumers buy, say when purchasing an airline ticket or when buying online garden furniture made from plastic to be delivered by mail. Previous research has focused on quantifying the pass-through of the price of crude oil or the price of motor gasoline to U.S. inflation. Neither approach accounts for the fact that percent changes in refined product prices need not be proportionate to the percent change in the price of oil, that not all energy is derived from oil, and that the correlation of price shocks across energy markets is far from one. This paper develops a vector autoregressive model that quantifies the joint impact of shocks to several energy prices on headline and core CPI inflation. Our analysis confirms that focusing on gasoline price shocks alone will underestimate the inflationary pressures emanating from the energy sector, but not enough to overturn the conclusion that much of the observed increase in headline inflation in 2021 and 2022 reflected non-energy price shocks.

Gas Prices and Oil Prices under the Russia-Ukraine War Regression Analysis of Inflation

In the context of the Russia-Ukraine war, this paper analyzes the impact of the changes of oil prices and natural gas prices on the core inflation rate, inflation rate, CPI and other factors in different types of countries. This paper argues that the changes in oil and gas prices caused by the Russia-Ukraine war have a significant impact on the inflation of developed countries, while the impact on the core inflation rate and CPI is not significant.

The impact of oil price changes on inflation and disaggregated inflation: Insights from Ghana

Numerous studies have examined the impact of changes in oil price on economic activities in both developing and developed countries. Yet, studies on the impact of oil price on various sectors of the economy are limited, particularly in Ghana. To contribute to the literature and inform policy actions, we examine the impact of oil price changes on aggregated and disaggregated inflation where the disaggregated inflation comprises energy CPI, food CPI, Core CPI, and transport CPI. We applied Nonlinear Autoregressive Distributed Lag (NARDL) Model to quarterly data spanning from 2000Q1 to 2021Q1. The NARDL model was suitable for analysis because it accounted for asymmetries inherent in oil prices. Our results from the NARDL model suggest evidence of the asymmetric impact of oil price change on both aggregated and disaggregated inflation. However, the asymmetric effect of oil price changes on Transport CPI was statistically higher in magnitude than the other sub-indexes of inflation, suggesting that oil price changes affect the transport sector more than the other sectors of an economy. From a policy point of view, these findings imply that to stabilize inflation, policies should be designed to strengthen the transport sector to contain oil price shocks.

Inflation and Recession under Economic Crisis

This paper examines the macroeconomic impact on economies of recent crisis events, such as the coronavirus pandemic and the Russia-Ukraine conflict. The COVID-19 pandemic and the Russia-Ukraine conflict have led to unprecedented disruptions in supply, demand, and productivity, with catastrophic impacts on health, society and the economy across the globe. This paper compares the changes in the relevant economic data of the United States, Europe and China through a simple comparison of graphic data (all from Trading Economics), and explores the differences and causes. It is clear that all three regions have been hit hard, and unemployment rates in the United States and the European Union have risen sharply during the pandemic, reaching a peak in recent 10 years. Their core consumer price indices (core CPI, excluding volatile items such as food and energy) rose sharply after the pandemic and the Russia-Ukraine conflict. China's core CPI showed a V-shaped trend, which briefly fell after the epidemic in 2020, but began to rise sharply in 2021, which is due to the low consumer confidence in China in 2020. Consumption went sluggish, and market prices fell, which is reflected in the core CPI as a downward trend. In 2021, consumption picked up, then prices rose, and the core CPI also rebounded. China's unemployment rate has also changed significantly, rising during both crises.

Research on the Time Series Analysis of Core CPI Index during the COVID-19 Pandemic

People's lives have altered in recent years as a result of the COVID-19 outbreak. People have modified their habits to adapt to the world after the pandemic. The inflation rate is a crucial index that represents the stage of lifestyles high-quality of people, as well as a critical index that indicates the developments and changes of economy. Global incidents continually play an necessary position in altering the inflation rate. The COVID-19 pandemic is one of the most influential incidents in people’s each day lifestyles in the previous decades. This paper tries to figure out how the COVID-19 pandemic influences the inflation rate in the United States or people’s expectation on the change of inflation rate.e Apart from that, this paper discusses the several indexes that represent the inflation rate as well. This paper also covers the research of the Core CPI, by using time series analysis with the help of R language and R-studio, and tries to draw conclusion from the analysis and related literature.

Exchange rate pass-through to Japanese prices: Import prices, producer prices, and the core CPI

Against the background of the two percent inflation target that Japan set in 2013, we investigate the impediments in the process of passing on exchange rate fluctuations to the core consumer price index. To this end, we construct the industry-level nominal effective exchange rate and industry-level producer price indices, which are matched with the industry classifications used for import price indices. Time-varying parameter vector autoregression analysis reveals that, in general, exchange rate pass-throughs increased, especially after the global financial crisis. Among the pass-throughs that occur at each stage of the import price, domestic producer price, and consumer price, we find that the weakest link exists between the import price and domestic producer price. However, the impact on the within-industry effect is not negligible; the small spillover effect on other industries at the producer price stage prevents consumer prices from rising after depreciation.

Housing preferences during the pandemic: effect on home price, rent, and inflation measurement.

With shelter comprising a one-third weight in the Consumer Price Index, an accurate measure of rent change is essential for determining factors affecting inflation measurement, economic policy, and consumer and business decisions. The pandemic led to a shift in consumer demand for more residential space, both in the home’s interior and exterior. With remote work severing the need to be located near the place of employment, some households opted for more space in lower-density areas, moving out of high-rise structures in the urban core to suburban and exurban single-family and low-rise homes, altering the price and rent-growth patterns among single-family detached, attached, and multifamily properties. While measures of rent change are available for multifamily residential properties, none exist for the single-family rental market, which makes up one-half of the residential rental market. The CoreLogic Single-Family Rent Index (SFRI) fills the gap in rent measurement. The SFRI is a repeat-transaction rent index for single-family homes and is available monthly for the U.S., by major metros, by rent price tier and by property type. The SFRI reveals that after 12 months of the pandemic annual rent growth for detached properties was more than 5 percentage points higher than for attached properties. Substituting the SFRI for Owners’ Equivalent Rent, we find that Core CPI inflation would be nearly 2 percentage points higher by mid-2021. To the extent the rapid acceleration in single-family detached rent growth has yet to be reflected in the CPI, inflation measurement will be understated with delayed signals for economic policy makers.

Response of the USD/MXN Exchange Rate to Macroeconomic Data

Purpose: The study aims to demonstrate the different roles of national and American macroeconomic variables as the determinants of short-term responses of the USD/MXN exchange rate. Design/Methodology/Approach: The study has employed regression analysis and the statistical analysis technique, within the framework of which the linear regression model has been used with the GARCH process for the random element. The model parameters have been estimated based on 30-minute data concerning currency exchange rates of three currency pairs subjected to analysis. The estimation of parameters has been conducted in the Stata 15 program. The currency exchange data were obtained from the Meta Trader 4 electronic trade platform. The study has employed the macroeconomic calendar of Investing.com, a global financial platform recognized by the world's investors. The econometric analysis has covered the period from January 2012 to December 2018. The series involved 185518 observations for the USD/MXN currency pair. Findings: The exchange rate of the USD/MXN currency pair responds more profoundly to US macroeconomic data than to national economic data, however with the proviso that this applies exclusively to some critical data, in particular, non-farm payrolls and core CPI. Practical implications: The study results have a cognitive as well as an application dimension. As regards the mental size, the article may be a source of knowledge on the Forex market and the determinants of shaping the USD/MXN exchange rate. As for the application dimension, the study results may be helpful for currency market players. The study may be addressed to investors who conduct transactions involving the USD/MXN currency pair. The proper identification of the currency exchange response translates into investment success. Originality/Value: To date, there have been no attempts to study the impact of 15 types of US macroeconomic data and 5 Mexican pieces of macroeconomic data within the M30 interval. The author believes that the conducted study will assist in making decisions by Forex market investors involved in USD/MXN currency pair investing.

The Error in the CPI, Which Precludes It Use in Inflation Targeting

In this paper, we examine the trends in the CPI and the core part of the CPI to bring out a grievous error in the core CPI. The core in certain years shows a jump of as much as 7% in certain quarters due to the error in the way the rent prices are computed. During the periods following the Pay Commission implementation, the “ rent” prices rise in the CPI, because the rents for the entire population are imputed from the “House Rent Allowance” accorded to government employees. “Rents” in the CPI have jumped up by as much as 35% in certain quarters, hugely overestimating the true inflation. This vitiates any use of the core CPI for monetary policy including inflation targeting. This will-o’-wisp that the RBI chased, had no doubt constrained growth in India.

Globalisation and the Decoupling of Inflation from Domestic Labour Costs

We provide novel systematic cross-country evidence that the link between domestic labour markets and CPI inflation has weakened considerably in advanced economies during recent decades. The central estimate is that the short-run pass-through from domestic labour cost changes to core CPI inflation decreased from 0.25 in the 1980s to just 0.02 in the 2010s, while the longrun pass-through fell from 0.36 to 0.03, with the estimates in the 2010s no longer significant. We show that the timing of the collapse in the pass-through coincides with a steep increase in import penetration from a group of major manufacturing EMEs around the turn of the millennium, which signals increased competition and market contestability.

Globalisation and the Decoupling of Inflation from Domestic Labour Costs

We provide novel systematic cross-country evidence that the link between domestic labour markets and CPI inflation has weakened considerably in advanced economies during recent decades. The central estimate is that the short-run pass-through from domestic labour cost changes to core CPI inflation decreased from 0.25 in the 1980s to just 0.02 in the 2010s, while the longrun pass-through fell from 0.36 to 0.03, with the estimates in the 2010s no longer significant. We show that the timing of the collapse in the pass-through coincides with a steep increase in import penetration from a group of major manufacturing EMEs around the turn of the millennium, which signals increased competition and market contestability.

A Test of Neo-Fisherism: 1964–2019

Abstract Neo-Fisherism, the theory that monetary authorities should expect inflation rates to be positively and causally related to their targeted nominal interest rates, is reviewed and empirically investigated. Using several different measures of interest rates and inflation we analyze US monthly data from January 1964 to April 2019. Granger causality tests are performed in search of a Neo-Fisherist impact of interest rates causally impacting inflation or the reverse. The full period is reviewed and is also divided into three sub-periods: the period before the Federal Reserve targeted federal funds rate at 25 basis points (labeled here as the effective lower bound, ELB), the ELB period, and the post-ELB period. Prior to the effective lower bound, we find evidence largely supporting the classical view of causality from inflation to interest rates, however the relationship is bidirectional depending on the measurement of inflation and interest rates. During the ELB, we find moderate evidence in support of Neo-Fisherism. In this period, federal funds rate Granger-cause changes in inflation as measured using the CPI and Core CPI. In contrast, during the effective lower bound period, the standard classical result holds when considering the Shadow federal funds rate. In the period following the effective lower bound, the standard relationship is found as well, in which inflation granger causes movements in the interest rates. Overall, the results regarding causality between interest rates and inflation largely support the classical view of causality but are dependent on data measurements and the observed time period.

An augmented P-Star model of US inflation

An augmented P-Star model is specified, estimated and tested to explain the phenomenon of subdued inflation in the US. While the model is estimated for both total and core CPI, the results show that it works better if the general price level is proxied by total CPI. Based on the empirical results, subdued inflation is attributed to declining velocity of circulation and the accumulation of reserves by banks. Another contributing factor is declining import prices as a result of global competition. Therefore, both monetary and real factors have roles to play in the generation of US inflation.

Dismiss the output gaps? To use with caution given their limitations

The link between inflation and the output gap is central to the conduct of monetary policy. In this paper, we use a new real-time database for Canada to study various output gap measures. We analyze output gap revisions and assess the usefulness of these gaps in forecasting total CPI inflation and three newly developed measures of core CPI inflation: CPI-median, CPI-trim and CPI-common. We also consider labour input gaps, projected output gaps, and simple combinations of output gaps. We find that, when forecasting CPI-common and CPI-trim, some gaps appear to provide information that reduces forecast errors when compared with models that use only lags of inflation. However, forecast improvements are rarely statistically significant. In addition, we find little evidence of the usefulness of output gaps in forecasting inflation measured by total CPI and CPI-median. These results call for cautiousness when central banks use output gaps to forecast inflation as their usefulness is limited.

Oil Price Shocks, Monetary Policy and Current Account Imbalances within a Currency Union

For more than two decades now, current-account imbalances are a crucial issue in the international policy debate as they threaten the stability of the world economy. More recently, the government debt crisis of the European Union shows that internal current account imbalances inside a currency union may also add to these risks. Oil price fluctuations and a contracting monetary policy that reacts on oil prices, previously discussed to affect the current account may also be a threat to the currency union by changing internal imbalances. Therefore, in this paper, we analyze the impact of oil price shocks on current account imbalances within a currency union. Differences in institutions, especially labor market institutions and trade result in an asymmetric reaction to an otherwise symmetric shock. In this context, we show that oil price shocks can have a long-lasting impact on internal balances, as the exchange rate adjustment mechanism is not available. The common monetary policy authority, however, can reduce such effects by specifying an optimum monetary policy target. Nevertheless, we also show that there is no single best solution. CPI, core CPI or an asymmetric CPI target all come at a cost either regarding an increase in unemployment or increasing imbalances.

Nonlinearities in the Phillips Curve for the United States: Evidence Using Metropolitan Data

With the unemployment rate in the United States currently below estimates of its natural rate we examine if the relationship between inflation and unemployment is nonlinear. Using aggregate data we are unable to reject a linear relationship. However, using metropolitan-level data we find the slope of the Phillips curve is roughly twice as large when unemployment is low compared to when it is high. Nevertheless the simple nonlinear Phillips curves used here suggest a core CPI inflation rate that is only slightly different than the linear version over the next couple of years.

Exploring the Nexus between Inflation and Globalization Under Inflation Targeting Through the Lens of New Zealand's Experience

We investigate empirically the inflation dynamics in New Zealand, a small open economy and a pioneer in inflation targeting, under various open-economy Phillips curve specifications. Our forecasting exercise suggests that open-economy Phillips curves under standard measures of global slack do not help forecast domestic inflation, possibly indicating measurement problems with global slack itself. In turn, under a stable inflation target we still find that (i) global inflation and (ii) global inflation and oil prices have information content for headline CPI and core CPI inflation over the 1997:Q3-2015:Q1 period and appear to be reliable proxies for global slack in forecasting inflation.

Exploring the Nexus Between Inflation and Globalization Under Inflation Targeting Through the Lens of New Zealand’s Experience

We investigate empirically the inflation dynamics in New Zealand, a small open economy and a pioneer in inflation targeting, under various open-economy Phillips curve specifications. Our forecasting exercise suggests that open-economy Phillips curves under standard measures of global slack do not help forecast domestic inflation, possibly indicating measurement problems with global slack itself. In turn, under a stable inflation target we still find that (i) global inflation or (ii) global inflation or oil prices have information content for headline CPI and core CPI inflation over the 1997:Q3-2015:Q1 period and appear to be reliable proxies for global slack in forecasting inflation.

Are there differences in the effectiveness of quantitative easing at the zero-lower-bound in Japan over time?

Using a time-varying parameter vector autoregression (TVP-VAR) framework with a new set of sign restrictions, we study the changing effectiveness of the Bank of Japan's Quantitative Easing policies over time. We specifically analyse the so-called Zero-Interest Rate Policy from 1999 to 2000, the Quantitative Easing Policy from 2001 to 2006, and most recently the so-called ‘Abenomics’ strategy.Our results indicate important differences of the Quantitative Easing (QE) shocks on the Japanese economy over time. More specifically, we find important time variation in the responses of core CPI and real GDP. With regard to the different monetary policy episodes in Japan we find somewhat more pronounced effects on core CPI during ‘Abenomics’. The responses of the price level are generally found to be stronger and more significant than those of real GDP. This holds particularly for the ‘Abenomics’ period. These results are mirrored by our variance decomposition analysis.