Current Inflation Rate Research Articles

Inflation is not dead: sweet and sour spots in the business cycle

This paper considers whether the current low inflation rates in the UK are due to‘the death of inflation’(because of structural changes to the economy, as claimed in a recent book) or should instead be interpreted as part of a business cycle which is largely monetary in origin.

Inequality, Inflation, and their Impact on China's Investment Environment in the 1990s and beyond

Inequality, inflation, and unemployment have become increasingly explosive problems in today's China. In conjunction with an analysis of the spatial pattern of inflation, this paper examines the current trend of China's spatial disparities, in terms of economic output, real consumption, and real income, within inter-provincial, inter-regional and urban-rural framework. This paper also investigates the combined effect of the current high rate of inflation and spatial disparity on China's investment and business environment in the 1990s. Findings of this paper suggest that inter-regional inequalities in economic development and income distribution, especially since 1990, have been accelerated/exacerbated by high inflation, which appears to hit the poorer areas disproportionally. Given the reinforcement of disparity and inflation and the current upsurges of rampant localism, the investment and business environment of China in the 1990s, in terms of political and social unrest and economic profitability, will...

What Explains the Current High Rate of Inflation in Pakistan?

One of the most significant developments in the current economic scene in Pakistan has been the sharp increase in the rate of inflation. The annual average rate of increase in the wholesale price index (WPI) during the first seven months (July-January 1994-95) of the current fiscal year has been about 19 percent as opposed to 11.3 percent during the same period last year. A similar increase was also witnessed in the consumer price index (CPI) which accelerated to 13 percent as opposed to 11.1 percent during the previous period. Such a sharp increase in prices in recent months has not only caused alarm in the academic circles but has equally disturbed the country’s chief executive, the Prime Minister. The recent surge of inflation is a matter of serious concern for a variety of reasons. First, Pakistan has been a low-inflation country as it has experienced price stability during the last three decades. The rate of inflation, as measured by an increase in the WPI, averaged 2.6 percent during the 1960s. The components of the WPI, i.e., food, raw materials, manufactures, and fuel and lubricants, also grew by an average rate ranging from 2.0 to 3.4 percent p.a. during then 1960s (see Table 1 for relevant statistics). The rate of inflation crossed the single-digit threshold during the 1970s. The WPI and its components increased at an annual average rate ranging from 12 to 18 percent. The double-digit inflation during the 1970s has been the result of two major oil shocks, a massive devaluation of currency, and devastating floods destroying agricultural crops. Pakistan returned to the fold of the single-digit inflation during the 1980s. The rate of inflation remained at the single-digit level during the first three years of the 1990s with the exception of 1990-91, when the rate of inflation increased to 11.7 percent as a result of the Gulf War. It is only during the outgoing fiscal year and in the current year that the rising inflation is posing a major threat to macroeconomic stability.

Déficit Público, a Sustentabilidade do Crescimento das Dívidas Interna e Externa, Senhoriagem e Inflação: Uma Análise do Regime Monetário Brasileiro.

Any attempt to examine the correlation between government deficit and inflation in Brazil must take into consideration Sargent and Wallace's statement to the effect that monetary policy alone cannot prevent the inflationary impact of a persistently expansionist fiscal policy. When primary deficits persist and the real interest rate exceeds the rate of economic growth, the inter-temporal government budget restriction is violated and the more expectation that money supply will grow may drive up current inflation rates. This paper checks these two assumptions through the unit root and cointegration tests. No evidence was found to indicate that budget restriction has been violated or that the rates of inflation fail to cointegrate with money supply expansion rates. The findings, however, do not point to any evidence of fiscal discipline. The Brazilian monetary system produces a strongly passive monetary behavior because the Central Bank generally operates by setting either a fixed interest rate in real terms or a fixed real exchange rate. A passive monetary policy turns seigniorage into an endogenous factor. At the same time, it boosts the growth of money supply whenever the self-fulfilling prophecies that inftation will grow indeed cause it to climb. This paper explores in detail some feature and consequences of monetary and exchange practices between 1991 and 1995 underlying that outcome.

Determinants of the Egyptian labour migration.

The objective is to summarize the pattern of Egyptian migration to Arab oil-producing countries (AOPC), to review some factors that are important determinants of labor movement based on theory, and to empirically model the migration rate to AOPC and to Saudi Arabia. Factors are differentiated as to their relative importance. Push factors are the low wages, high inflation rate, and high population density in Egypt; pull factors are higher wages. It is predicted that an increase in income from destination countries has a significant positive impact on the migration rate. An increase in population density stimulates migration. An increase in inflation acts to increase out-migration with a 2-year lag, which accommodates departure preparation. Egypt's experience with labor migration is described for the pre-oil boom, and the post-oil boom. Several estimates of labor migration are given. Government policy toward migration is positive. Theory postulates migration to be determined by differences in the availability of labor, labor rewards between destination and origin, and the cost of migration. In the empirical model, push factors are population density, the current inflation rate, and the ratio of income/capita in AOPC to Egypt. The results indicate that the ratio of income/capita had a strong pull impact and population density had a strong push impact. The inflation rate has a positive impact with a lag estimated at 2 years. Prior to the Camp David Accord, there was a significant decrease in the number of Egyptian migrants due to political tension. The findings support the classical theory of factor mobility. The consequences of migration on the Egyptian economy have been adverse. Future models should disaggregate data because chronic shortages exist in some parts of the labor market. Manpower needs assessment would be helpful for policy makers.

Testing for rational bubbles with exogenous or endogenous fundamentals: The German hyperinflation once more

The presence of rational price bubbles during the German hyperinflation is tested under two different structural assumptions on the money process. If the money supply is constrained to be exogenous to the current inflation rate, the hypothesis of no bubble can be rejected. However, this is no longer found to be true when a feedback rule from inflation to money creation is allowed. The analysis contradicts previous results presented in the literature.

Planning Feature The Forecast in Detail: [4] Focus: Unit Labour Costs in Manufacturing Industry and the Outlook for Price Inflation

The latest figures show that unit labour costs in manufacturing rose 8.9 per cent in the year to March, the highest rate of increase since 1981 (when costs were decelerating) and a sharp contrast with 1983 when, for a brief period, COSD were stable. In this Focus we examine how this development has occurred and consider its implications. We conclude that the recent figures represent a temporary deterioration in the costs of manufacturing industry and that, once output picks up again and as long as wages respond to the current low rate of inflation, there should be no severe adverse consequences on either inflation or output. If, however, costs are not controlled then the outlook for either inflation or output and unemployment is worse than our central forecast suggests.

Magnetospheric convection effects at mid‐latitudes: 1. Saint‐Santin observations

We use E×B data from the Saint‐Santin incoherent scatter facility to study the behavior of mid‐latitude ionospheric electric fields during magnetic storms and substorms. To this end, we analyze the relation between departures of the Saint‐Santin field from its quiet day values and the simultaneous variations of parameters characterizing the state of magnetospheric convection: the IMF BƵ component, the auroral electrojet index, and the ring current inflation rate as deduced from time variations of the Dst index. Mid‐latitude E×B drift disturbances, when they occur during substorms, are generally associated with a large southward value of BƵ and with large values of the ring current inflation rate. They are also associated in several instances with an activation of the eastward electrojet in the afternoon and evening sectors. Large values of the drift disturbances are also observed during magnetic storms, but their relationship to the large‐scale convection parameters monitored does not seem to be reductible to the simple real‐time relationships found for the substorm cases. This suggests that an additional mechanism characterized by a longer time constant may be at work. We calculate the average disturbance drifts for Kp ≧ 30 and express them as a diurnal harmonic function of local time. There is no clear effect in the north‐south drifts (east‐west electric fields), but the east‐west drifts (north‐south electric fields) display large average disturbances. They are westward at all local times, maximize at 2200 LT with a 75‐m/s amplitude, but are very small in the 0612 LT quadrant. A 34‐m/s westward steady component and a 26‐m/s diurnal oscillation are the two dominant terms of its harmonic content. This pattern is interpreted in the third companion paper.

On Policy Implications of a Non-linear Phillips Curve in a Stochastic Environment

In a recent paper Hvidding [5] derived some interesting policy implications of a non-linear Phillips curve when the unemployment rate is a random variable. Hvidding’s analysis focussed on the following model:where p is the current inflation rate, u is the unemployment rate, p* is the expected inflation rate and a, b and c are constants. The influence of uncertainty in this model manifests itself in the expected value of u-1. For this Hvidding used an approximation suggested by Mood, Graybill and Boes ([6] page 181).

The Impact of Inflation on Used Machine Values

ABSTRACT Astatistical model was developed to estimate the 'as is' values during periods of high rates of inflation of five categories of farm tractors and three groups of combines. The results indicate that at current inflation rates, most tractors and combines are likely to retain a very substan-tial portion of their original price.

Teaching cost containment to house officers at Charlotte Memorial Hospital

A cost containment program initiated in 1975 on the medical teaching service of an 890-bed university affiliated hospital has led to a significant improvement in house staff utilization of facilities and procedures. During the first three and one-half years of the program the average length of stay on the general medical service was reduced by 21 percent; and the cost per admission rose at a rate of only 4.3 percent per annum, while the cost per admission on other services rose at an average rate of 14.5 percent per year. In the outpatient setting eliminating unnecessary laboratory procedures resulted in an actual reduction in patient-encounter cost initiated by interns despite price increases on all procedures. Overall cost advantage gained by reduction in utilization will rapidly be negated, however, if the current rate of inflation continues.

Inflation and stagflation

This paper reports on the author's theoretical and empirical research which has supported the following propositions. First, the change in the rate of inflation from one year to the next depends upon the growth of the money supply less the current rate of inflation. The current unemployment rate does not significantly affect whether the rate of inflation will rise or fall. If the monetary authorities raise the rate of monetary expansion above the current rate of inflation, the latter will rise regardless of the slack in the economy. Second, the change in the unemployment rate from one year to the next depends upon: (a) the deviation of the current unemployment rate from its equilibrium value and (b) the growth of the money supply less the current rate of inflation. The first effect concerns wage flexibility and the second effect concerns the shift of the aggregate demand ( C+ I+ G) curve.

Most Profitable Felling Regime for Radiata Pine on Average Sites in the Western Cape in 1976

ABSTRACT For a planting density of about 1 333 trees per ha, normal costs and prices, and a discount rate of 5% (the rate at which money can be borrowed under the forestry credit scheme), the highest discounted profit is obtained by removing 60% of the trees in a thinning at 8 years, 20% of the remaining trees in each of the subsequent thinnings at 13, 18 and 23 years, and clearfelling at 35 years. This regime yields a land expectation value (i.e. discounted profit before deduction of land value) of about R300/ha, and a real rate of return of some 5,7% which at the current inflation rate of 11% p.a. corresponds to an apparent or nominal rate of 17,3%.

Targets for Monetary Policy in the Coming Year

MOST OBSERVERS would agree that the present state of the economy can be traced largely to the monetary policy pursued during the last few quarters, in particular the severe monetary squeeze of mid-1974. We see this policy as resulting from the pursuit of inappropriate targets framed in terms of monetary aggregates and markets-since we disbelieve that policymakers intended to achieve 9 percent unemployment, so far off any target announced by the administration or sanctioned, even indirectly, by Congress. In order to avoid similar episodes in the coming difficult quarters, monetary policy should be aimed at explicitly stated targets for real output and employment, and at consistent targets for money income. The purpose of this paper is to propose appropriate real targets for the next two years and to examine their implications for monetary policy. In the light of the high unemployment of mid-1975, and of the importance of an orderly reduction of the current high rate of inflation, the aim proposed is to bring down the rate of unemployment over the next two years to

Phillips Curves, Expectations of Inflation and Optimal Unemployment over Time

Readers of my article on optimal over time1 will recognize its principal theme to be the following. Among all alternative equilibrium states of steady anticipated or deflation, all with the same steady unemployment rate, there exists a state with an algebraic anticipated rate that is optimal. But, by virtue of the immediate postulated gains from over-employment-from employment in excess of the equilibrium level-and the immediate postulated losses from under-employment, social time preference plays a critical role in determining each day's optimal level of aggregate demand and thereby the ultimate steady rate of algebraic that society will asymptotically settle for. The higher the rate of time preference, the more does this asymptotic algebraic rate exceed the statically optimal rate and the greater is the present optimal level of aggregate demand. If the current rate of inflation exceeds the asymptotic rate of algebraic inflation, then the optimal aggregate demand policy will produce transient (vanishing) underemployment and thus a rate of below expectations. If the current expected rate of is below the asymptotic rate of algebraic inflation, then the optimal fiscal policy aims for transient overemployment and algebraic in excess of expectations. It is odd that Mr. Williamson, in his Comment, 2 should find a deflationist moral in this even-handed theme. My article rejected the conventional approach to the choice of aggregate demand, which takes expectations as exogenous or irrelevant, not any conventional conclusion about the merits of inflationary policies. One conclusion of the model is that a society with the requisite time preference can rationally opt for over-employment, unexpectedly high and its aftermath of high steady in the eventual future equilibrium. Even the statically optimal rate of algebraic inflation-in my formulation this is the maximum rate of algebraic consistent with full liquidity or monetary efficiency-might be one of mild if the real rate of interest is small enough. The interesting variation on this dynamic model that Williamson proposes would, loosely speaking, make more deflation worse than less deflation on the other side of the static optimum. There are