Current Inflation Rate Research Articles

Public debt stabilization via a stochastic differential game paradigm

In this paper, we examine a public debt stabilization in a country under inflation targeting by arguing that bond yields are sensitive to inflation risks. Endogenously defining the convenience premium function, we focus on fiscal and monetary strategic interactions within an optimal control setting. The level of the debt-to-gross domestic produced (GDP) ratio and current inflation rate of the country are considered as the state variables in the game. We then focus on the convenience risk premium and rate of inflation as market-based disciplining devices, to articulate the Nash noncooperative equilibria, cooperative equilibria and Stackelberg equilibria via a feedback control strategy. We show that the outcome of the game depends on the parameters of the game, the type of equilibrium one considers and the decision horizon. When the current inflation rate follows an uncontrolled Ornstein–Uhlenbeck dynamic process, we highlight its effects on the growth rate of the debt ratio. Hence, our model provides a novel framework in which monetary and fiscal authorities can simultaneously achieve their individual interests, while achieving an optimal debt stabilization policy in the presence of inflation. We also highlight the need for governments to adopt policy-approaches which maintain the debt-to-GDP ratio under an inflation-dependent ceiling.

Understanding Global Commodity Price Shocks on Exchange Rates and Inflation in Emerging Economies: ARDL Perspective

Aims: To analyze the changing relationship between commodity prices (cocoa, diesel, gold, oil, petrol) and macroeconomic factors (exchange rate and inflation) in Ghana and differentiate between long-term and short-term effects.
 Study Design: Quantitative Design with Time series analysis using the Autoregressive Distributed Lag (ARDL) technique.
 Methodology: The study utilized cointegration and Error Correction Model in econometric estimation. Time series data for commodity prices and macroeconomic factors were collected for the period 2003M01 to 2023M10. The ARDL technique was applied to differentiate between long-term and short-term effects of inflation and exchange rates.
 Results: The short-run and long-run results indicate a positive relationship between commodity prices and inflation and exchange rates. A 1% increase in diesel prices is associated with a 0.23% appreciation in Ghana's currency in the short run (p=0.019) and a 1.76% rise in inflation in the long run (p=0.012). Past inflation has a dominant influence on current inflation, with a 1 percentage point increase in the previous year's inflation leading to a 0.45 percentage point increase in the current inflation rate.
 Conclusion: Policymakers should prioritize stabilizing diesel prices, invest in storage facilities, promote alternative energy sources, strengthen domestic production and distribution of essential commodities, and adopt targeted monetary and fiscal policies to anchor inflationary expectations and address inflation inertia in Ghana.

CAUSALITY ANALYSIS OF MONEY AND INFLATION IN THE PHILIPPINE ECONOMY: EVIDENCE FROM THE PERIOD 1960 TO 2020

<p>This work aimed to investigate the causal relationship between money and inflation (proxy by CPI) in the Philippines using Vector Autoregressive (VAR) Analysis and the Granger Causality Test. The results showed that both series are stationary in levels; hence, VAR in levels was utilized. The results of VAR(2) show a link between the two variables. The current inflation rate in the Philippines is affected by a one-year lag in money supply. The Granger causality test revealed the unidirectional connection between inflation and money. Furthermore, past levels of price stability can be used to forecast monetary stability in the Philippines. Technically, CPI Granger causes M2.</p><p><strong> </strong></p><p><strong>JEL</strong>: E31, E52, C32, C53, C58</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0758/a.php" alt="Hit counter" /></p>

Time series-based Project Cost Forecasting Framework

Current inflation rates have significantly been increasing construction project costs globally. Thus, it is crucial to consider potential inflationary trends when estimating the cost at completion of prolonged projects. However, the absence of literature providing guidance on analyzing inflation trends and adjusting the ongoing project cost performance factor is a gap that needs filling. This study proposes a framework for estimating ongoing project costs based on trend and seasonality analysis of the project cost performance through the Holt-Winters method. The proposed framework also incorporates the estimation of project completion time and is applied to a real case study to assess its efficacy. The results are compared with the ones obtained through pre-existing index-based methods. This paper seeks to improve the accuracy of project cost estimation and management in challenging and uncertain economic environments by providing an alternative to the traditional cost at completion forecasting approach.

Hungary's inflationary exposures to global price movements

AbstractThis paper investigates Hungary's inflationary exposures to global price movements using a simple cost-push input-output price model and a database of inflation-to-output price elasticities (Global Inflation-to-Output Price Elasticity Database, GIOPED) developed on the basis of the OECD's Inter-Country Input-Output Tables. Inflation elasticities are decomposed into local, simple, and complex global value chain effects by applying Wang's decomposition scheme (Wang et al. 2017) to price movements and inflation. Our empirical analysis based on GIOPED elasticities shows that Hungary is highly exposed to global value chain price transmissions originating in Germany, Austria, and Russia; and in particular to changes in energy prices. The crude oil and natural gas price boom and the resulting energy crises caused a significant increase in consumer price levels in Hungary; however, this explains only a fraction of current inflation rates.

Volatile energy markets, consumers and energy price expectations

We conduct a survey of consumers in four EU countries (the Czech Republic, Germany, Italy and Poland) faced with supply disruptions, rising energy prices, and serious concerns about both prices and actual availability of energy inputs due to Russia's war on Ukraine. We find that people are aware of the current prices of motor fuels, and willing and able to form expectations for them in one, six, 12 and 60 months. The mean annual rate of growth of prices is positive, exceeds or is equal to the current inflation rate, is greater than the long-run inflation rate in the last 10—20 years, and declines with the length of the horizon over which the respondents are to form their expectations. At least one-third of the respondents expect the prices to decline in the future, and about one-quarter expect them to stay the same. The expectations are affected by the individual characteristics of the respondents and their beliefs about the causes of the current state of the energy markets. The behavioral responses announced by the respondents (change travel mode, reduce driving, replace their car with a more fuel-efficient one, etc.) appear to be realistic and well thought-out, and depend on the expected direction of the expected price changes, rather than their magnitude. By contrast, our respondents struggle with grasping the current prices per unit of electricity or natural gas, and envision higher, and considerably more uncertain, growth rates for them.

Relationships between stock returns and real earnings yields over the last 150 years

This research finds ex-ante real earnings yields on the S&P Composite Index of equities to be significantly related to their subsequent annual returns over the last 150 years. The real earnings yield forecast is computed by adding a market-based prediction of long-term future inflation to the ratio between the highest past earnings on the S&P Composite and the current level of that stock market index. Equity return deviations from this real earnings yield over the last 150 years have been positively associated with the prior decade's inflation rate but negatively related to the current inflation rate.

Retailing in times of soaring inflation: What we know, what we don't know, and a research agenda

Inflation is back – with a vengeance. Following the highly disruptive years of the pandemic, the world has experienced inflation levels not seen for many decades. A “perfect storm” of underlying causes including expansionary monetary and fiscal policies during the pandemic, pent‑up demand, supply-demand imbalances and commodity-driven cost pressures due to unfavorable weather conditions in various regions and Russia's invasion of Ukraine, all conspired to steeply increase consumer price levels around the world. While current inflation levels are not unprecedented (they were even higher in the 1970s and 1980s), the decades-long period of extremely low inflation experienced in most countries means that current inflation rates continue to shock consumers, manufacturers and retailers. Equally, academic research has very little to say about how to conduct marketing in inflationary times, and that is why this paper presents an overview of what we know, what we don't know and what we argue we should know in the form of a research agenda.We first review key takeaways from prior inflation-focused research in the marketing literature, along with insights that could be derived from related studies that considered other causes of disposable-income reductions. However, given that the inflation literature is sparse, while insights from other forms of disposable-income reduction may not automatically generalize to the current inflationary setting, we identify various knowledge gaps along with a wide-ranging set of questions in need of further research in marketing and retailing. We do so, in the spirit of the Empirics-First approach to relevant knowledge generation, by identifying several frequently used retailer-initiated coping strategies. We subsequently circle back to pertinent prior literature to help with the interpretation of the observed patterns, identify best practices, and warn against potential pitfalls. We hope that this article will inspire cutting-edge research into the consumer-, retailer- and marketing consequences of extreme inflation, a worldwide problem that affects us all and is directly linked to the core role of retailing in the supply-chain channel.

Soaring inflation in sub-Saharan Africa: A fiscal root?

The study investigates the effect of fiscal policy on the inflation rate in a panel of 44 sub-Saharan African (SSA) countries over the period 2003-2020 using a non-linear system generalized method of moments (system GMM) and the dynamic panel threshold estimation techniques. The results show that the recent increase in inflation rate has a fiscal nature and that monetary policy alone may not provide an effective response. Specifically, the results indicate that a positive shock to fiscal policy (captured by public debts) has a positive and statistically significant effect on inflation, while a negative shock to public debt has a statistically non-significant impact on the inflation rate. Also, money supply exerted a positive and insignificant impact on inflation, indicating that the current inflation rate in the region may not be induced by money supply. However, the joint effect of public debts and money supply shows that public debts aid the effect of money supply on the inflation rate, albeit, not in the proportion predicted by the quantity theory of money. Further, the results also found a public debt threshold point of 60.59% of GDP. This implies the current inflationary pressure may be rooted in fiscal policy and that further accumulation of public debts beyond the benchmark established in the study would worsen the inflationary pressure in SSA. Importantly, the study found that for fiscal policy to spur growth and reduce inflationary pressure in SSA, the inflation rate should be managed and brought within a single-digit framework of 4%. The research and policy implications are discussed.

Banks as existential but uncontested Evil of the world economy (about the 2022 Nobel prize in economics)

The author examines the complex of reasons that prompted the Nobel Committee to award the Nobel Prize in Economics for 2022 to former Federal Reserve System chairman B. Bernanke (2006-2014). The award was granted not only to B. Bernanke, now a leading researcher at the Brookings Institute (Washington, D.C.), as well as to two other American economists - a professor at the University of Chicago, Booth School of Business D. Diamond and a professor of Washington University (St. Louis, Missouri) F. Dybvig for their research of the mechanism of the banking system functioning during financial crises. It is emphasized that the awarding of the Nodel prize to B. Bernanke and two other American economists was politically biased and intended to “rehabilitate” the monetary policy pursued by the FRS in 2007-2009 during the Great Recession. In the long run it led in the early 2020s to record inflation rate in 40 years. During his tenure as Chairman of the Fed, Bernanke, as a supporter of the monetary theory of the Great Depression of the 1930s, proposed in 1963 by the head of the Chicago School of monetarists M. Friedman, deliberately departed from the main regulatory norm of the former monetary policy, formulated in 1993 by Stanford University professor J. Taylor (the so-called “Taylor rules”). It provided for the constant excess of the federal fund rate over the current inflation rate in order to keep the consumer price index growth under constant control of the US monetary authorities. As a result of arbitrary actions by the FRS under the leadership of B. Bernanke, at the end of 2008 the federal fund rate was lowered to zero, and since then it has been consistently below the inflation index. As a result, in the early 2020s, the Fed lost control over inflationary processes in the American economy. These actions of the Fed were a direct consequence of the incorrect diagnosis made by B. Bernanke. He stated that the main threat to the American economy in XXI century, as in the 1930s, is a hypothetical deflationary mode of operation, although since the end of World War II the US economy functioned exclusively in an inflationary mode. Combined with the uncontrolled use of the printing press and exorbitant lending in the period 2007-2009 the Fed managed to minimize the crisis in the US banking system, in fact, to save it, at the cost of transforming the so-called “liquidity trap” into a “debt trap”. The Nobel Prize was awarded to B. Bernanke by the Swedish Central Bank for saving both the American and the leading segments of the world banking system, however, at present, the general population and various sectors of the real economy have to pay for such experiments in monetary policy.

The Existence of Phillips Curve theory in Ethiopia

To continue Ethiopia’s successful path towards becoming a middle income country, it is an important issue focusing on macroeconomic variables. In this modern world inflation and unemployment’s are a most sensitive issue and needs critical attention to overcome problems which come from those two macroeconomic variables. Thus, the objective of the study was to investigate the long run and short run relationships, plus to this to look the causality between inflation rate and unemployment in Ethiopia. The study utilized Augmented Dickey-Fuller test, Auto Regressive Distributed Lag model and Granger causality test by using Vector Error Correction Model with a time spam of 1984/85-2019/20. The finding appears unemployment (contrarily and pitifully) and expected inflation (positively) has long run impact on the current inflation rate. Within the short run as it were anticipated inflation (positively) affect inflation rate but there's no short run relationship between inflation rate and unemployment rate. From this, the researcher proofs that Phillips curve exist in long run (contrary to 1970’s theory), not in short run (contrary to 1950 and 1960’s theory). At long last, the study suggests the government ought to center on fiscal approach which plays an incredible part on unemployment decrease and money related arrangement for inflation rate. Besides, a government ought to maintain a strategic distance from fumble on outside obligation utilization and outside coordinate venture. The government ought to alter the populace growth to economic progress. Keywords: Augmented Phillips curve, Ethiopia, Inflation, Unemployment DOI: 10.7176/JESD/13-11-03 Publication date: June 30 th 2022

Feasibility evaluation of an off‐grid solar‐biomass system for remote area electrification considering various economic factors

AbstractOff‐grid renewable energy systems are a solution for power generation in areas where access to the grid is not possible or cost‐effective; in particular, low population rural areas located far away from grid lines or in rugged terrains. Furthermore, over‐reliance on fossil fuels for supplying global energy demand has led to the depletion of nonrenewable resources and environmental issues. This paper presents a feasibility assessment of an off‐grid hybrid renewable energy system for a remote rural area in Kohgiluye and Boyer‐Ahmad Province in Iran. Regarding the available energy resources in the region, a photovoltaic (PV)‐biomass energy system is considered. HOMER Pro software is utilized to find the optimized sizing of the PV‐biomass system to fulfill this load demand. The objective function in this optimization is the system's total net present cost. Due to the rapid fluctuation of economic factors in the country, several rates of inflation and discount rate are considered to investigate their influence on the costs of the system. The optimization result for the current inflation rate of 40% and the discount rate of 18% in the country proposes a hybrid energy system consisting of a 3 kW biogas‐fueled generator, 4.74 kW PV, 10 kWh battery, and 2.07 kW converter to meet the 2.64 kW peak load and 14.53 kWh/day consumption of the community. The total net present cost and cost of energy are $93,057 and 0.0933 $/kWh, respectively. Finally, the environmental assessment of the proposed hybrid system shows an annual CO2 emission of 2.95 kg, which means 99.9% CO2 emissions mitigation compared to a conventional coal‐based electrical plant.

Perspectives regarding Current Account Deficit, Interest Rates, Inflation and Exchange Rates; Turkey Example1

The current account deficit problem has become one of the chronic problems of Turkey during recent years. To achieve macroeconomic balance, the share of the current account deficit in the gross domestic product should be kept under control. Due to this reason, it is of great significance for the economic policies to be formed to analyze the factors affecting the current account deficit and to reveal which one has a larger share of the current account deficit. Turkey's current account deficit between the years 2002-2019 will be analyzed with the VAR model and the Granger causality test in this study. The purpose of the study is to reveal the whole of the factors affecting the current account deficit and to reveal the relationship between inflation, which is seen as financing the current account deficit, but which is one of the biggest problems of the Turkish economy, the exchange rate, which is the most significant factor in our foreign trade, and the interest rate trio, which affects the foreign capital inflow to the country, with the current account deficit.

The efficiency of primary sovereign bond markets in Turkey: The so-called Fisher puzzle reconsidered

Many prior studies have tested the validity of the Fisher effect , with results proving controversial, regardless of the econometric models , country groups, or time spans chosen. Therefore, to solve the so-called Fisher puzzle, this study aims to reveal whether current interest rates , which are set in the primary bond markets, carry information about actual inflation rates when the conventional direction of causation is reversed, using monthly Turkish data from the 2010–2018 period. In line with our expectations, we found a significant long-run coefficient (0.92), which indicates that changes in interest rates are rational expectations of changes in current inflation rates, though a full Fisher effect was not observed. Moreover, the short-run coefficients were also significant, which highlights the fact that the unanticipated movements in these variables act as early signals of persistent future price-level changes. Therefore, monetary authorities should respond rapidly in the short run using rules-based proactive policies to curb long-run volatilities, which also restrict the power of estimations, as market participants tend to assign higher risk premiums to bond yields when prices are expected to surge.

Protecting Portfolios Against Inflation

Inflation is a perennial threat to the real value of portfolios, even though current inflation rates are low. To protect portfolios against inflation, cash, inflation-indexed bonds, equities, real estate, and commodities are the usual candidates. We examine each, plus other assets and, importantly, various kinds of liabilities, to examine their historical and prospective responses to expected and unexpected inflation. Our article is integrative, bringing together ideas and data from many different sources in one place.

Inflation targeting and expectation anchoring: Evidence from developed and emerging market economies

Inflation expectations can be inferred from treasury yields data. Previous studies utilizing such data have found evidence for the role of inflation targeting in anchoring inflation expectations in a number of developed market economies. The goal of this paper is to extend the evidence for emerging market economies. We estimate inflation expectations from nominal treasury yields data and infer the anchoring of inflation expectations from the sensitivity of inflation expectations to current inflation rates. Our analysis shows that the effect of inflation targeting is statistically significant in emerging market economies as well as in developed market economies and that the magnitude is marginally greater in the former. Our results are robust to alternative specifications.

Validity of Taylor's rule for Turkey: An empirical study

The aim of this paper is to propose an estimate of the reaction function of Turkey's monetary policy for the periods from January 2005 to January 2020. In this perspective, a VAR (Vector Autoregressive) model is set up. The VAR model was estimated using Stata software. In this study, the Taylor rule is extended by implicating the industrial production index and the monetary aggregate M2 into policy reaction function. By doing so, the Taylor rule is investigated for the Turkish economy, and the validity of the rule is tested. The results of the ADF test show for all the observed variables that the null hypothesis of a unit root is rejected. In other words, the condition of stationarity seems to be satisfied. In the short term, it seems that a change in the behavior of the variable M2 has an impact of 1% on the level of the current inflation rate as well as the current real interest rate. For the period studied, the results of the VAR modeling indicate that Taylor's rule is partly true for the short term but that it is not for the long term. The choice of the period studied seems to be the main reason for the non-cointegration between the inflation rate and the bank rediscount rate.

THE INFLUENCE OF DECISIONS ON INCREASING SOCIAL STANDARDS ON MONETARY POLICY

Abstract. Raising social standards is an essential instrument of social policy by the state. However, the decision to raise the minimum wage rather sharply should consider its impact on fiscal and monetary policy. The article aims to study how government decisions on social standards (in particular minimum wages) can influence monetary policy decisions based on inflation targeting. Results of the research. The method of analysis of indicators and consequences of the introduction of inflation targeting in Ukraine, geographical neighbors and countries with similar economies is described. It is determined that the final effect of changes in social standards on inflation depends on the entire transmission mechanism, which includes several interrelated reactions, and maybe stretched over time, depending on both the speed of transmission of the impulse and the specifics of institutional regulation. It is established that the criterion for a dramatic increase in the minimum wage is a significant upward shift of the minimum wage to the average wage ratio curve. In this case, as we have shown, inflation expectations worsen, which modifies somewhat the behaviour of economic agents and is transferred to current inflation rates in the future. Raising social standards is a good decision of the government in order to maintain household incomes. However, to ensure the neutrality of such a decision for fiscal and monetary policy, it needs to be aligned with its objectives and strategies. Keywords: social standards, monetary policy, inflation targeting, minimum wage, GDP, government. JEL Classification Е 600 Formulas: 0; fig.: 3; tabl.: 1; bibl.: 17.

The Study on the Influence of Terms of Trade on Regional Inflation – Based on the Mixed NKPC Model Under the Opening Economy Condition

Based on the panel data from 1990 to 2018, this paper analyzes the regional difference in the impact of changes in price terms of trade and changes in income terms of trade on inflation by establishing the Hybrid NKPC model under the open economy. The empirical results show that the changes in price terms of trade and the changes in expected price have a significant negative and positive impact on the current inflation rate for each region. The changes in income terms of trade and the changes in expected income terms of trade have significant negative and positive effects on the inflation for each region. There is a significant difference in the degree of impact on the regional inflation and the degree of impact will further strengthen. Therefore, the change in terms of trade is an important determinant of the level and trend of domestic inflation in both the short term and long term.

Determinants of Inflation in Liberia: An Econometric Analysis Using ARDL Bounds Testing Approach

The rate of inflation in Liberia has increased significantly over the last two decades and, since the ascendency of the new government headed by President George Manneh Weah, it has become more pronounced. The steep rise in inflation is increasingly eroding the purchasing power of consumers, thus leading to welfare decline especially for low income earners. The overarching objective of this study is to assess the determinants of inflation in Liberia. To achieve this objective, this study employs Bounds Testing Approach and Autoregressive Distributed Lag (ARDL) techniques using monthly time series data spanning the period 2014 to 2018. The empirical findings of this study reveal that, the current rate of inflation in Liberia is largely influenced by the unauthorized printing and infusion of new banknotes into the economy by the Central Bank of Liberia. In addendum, the results show that Customs taxes, foreign exchange rate depreciation arising from balance of payment deficits, international oil price, and import are key determinants of inflation in Liberia. Consistent with the results, this study recommends the demonetization of the current Liberian dollars banknotes (both old and new). This will provide the central bank with reliable data regarding the total quantity of Liberian dollars in circulation, thereby enabling the bank to promulgate salient contractionary monetary policies that would drive the current rate of inflation to single digit. Additionally, this study recommends that the government of Liberia embark upon diversification policies with greater emphasis placed on value addition in manufacturing and agricultural production for domestic consumption. JEL Classification Codes: E31; E58. Keywords: Liberia, Inflation, ARDL, Central Bank of Liberia DOI: 10.7176/JESD/11-6-04 Publication date: March 31 st 2020