Inflation Index Research Articles

Trade-threshold Effect on Inflation in Tunisia: New Evidence Resulting from a Nonlinear Approach

ABSTRACTTrade openness is an important determinant of the inflation process. The effect of trade openness on inflation, however, is still an issue of debate at both theoretical and empirical levels. This study tried to provide a contribution to the literature by examining the relationship between inflation and trade openness in Tunisia over the period 1975Q1-2015Q4 using a nonlinear model. The originality of this study stems from the fact that it is the first investigation considering both the Residual-Based Tests for Cointegration in Models with the Regime Shifts and Threshold Regression model. The linear model confirms the existence of a positive relationship between inflation and trade in Tunisia. Yet, considering the nonlinear model, trade openness growth and Consumer Price Index (CPI) inflation growth show a statistically significant negative link as long as the trade openness evolution does not exceed the threshold. Nevertheless, if the trade openness growth is higher than the threshold, integrating the trade positively affects CPI inflation. Furthermore, a positive influence of Money supply growth on this type of inflation was noticed in Tunisia in all the considered regimes proving the effect of monetary factors on inflation level. Consequently, trade openness could be used to control inflation in Tunisia.

Effect of oil price pass-through on domestic price inflation: Evidence from nonlinear ARDL models

We intended to demonstrate that oil price can have a different passthrough effect into domestic prices at consumer and production levels subject to an oil dependency factor. The results were compared between oil-importing and oil-exporting countries. The nonlinear autoregressive distributed lags (NARDL) models were used to capture the asymmetric pass-through effects of oil price increases and decreases in consumer price and producer price respectively. Our results revealed that oil price changes can have asymmetric effect on consumer price index (CPI) inflation directly and indirectly with more influential impact of indirect effect. This result holds for both groups of countries. The effect on producer price is much larger especially in oil-importing group due to the high dependence of these countries on oil. Oil price changes did lead to increases in consumer prices in oil-importing countries. This may due to effective monetary policy that enhances price stickiness in the economy.

Analysis of Mankiw’s Theory of Optimal Seigniorage and Inflationary Taxes in the Iranian Economy: Semi-Parametric Approach

While earning money, seigniorage increases the amount of money and when economic growth is less than the growth of money, it causes inflation in the society. Therefore, in terms of monetary authorities, understanding the behavior of the demand function of money and the amount of income that government can earn through seigniorage with minimal inflationary impact, is necessary and important. The aim of this study is to investigate the Mankiw’s theory of optimal seigniorage in which higher tax rates are associated with higher inflation and higher nominal interest rate; this is to say that government has two ways such as seigniorage and increases the taxes to financing its expenditures. In order to test the Mankiw’s (1987) theory of optimal seigniorage, the seasonal data on nominal rate, inflation and tax rates have been used for the period of 1992-2014 and forementioned relationship was extracted through model estimation in the framework of a semi-parametric model. According to the results, the nominal interest rate has a direct relationship with the consumer price index (inflation) and tax rates in long-term.

Combining forecasts: Performance and coherence

There is general agreement in many forecasting contexts that combining individual predictions leads to better final forecasts. However, the relative error reduction in a combined forecast depends upon the extent to which the component forecasts contain unique/independent information. Unfortunately, obtaining independent predictions is difficult in many situations, as these forecasts may be based on similar statistical models and/or overlapping information. The current study addresses this problem by incorporating a measure of coherence into an analytic evaluation framework so that the degree of independence between sets of forecasts can be identified easily. The framework also decomposes the performance and coherence measures in order to illustrate the underlying aspects that are responsible for error reduction. The framework is demonstrated using UK retail prices index inflation forecasts for the period 1998–2014, and implications for forecast users are discussed.

The Impact of Workers’ Remittances on Economic Growth: Panel Data Approach for Selected Country Group

Recent decade has witnessed the growing importance of remittances as a source of foreign income for many developing countries. Thus, as the value of remittances around the world increases, many researchers attempt to analyze the remittances’ effects on economic performance. Yet, real effect of remittances on economic growth rate is still controversial issue in the literature. Therefore, main objective of this study is to analyze the linkage between economic growth rates and remittance inflows into eight largest recipient countries of the global remittances by employing panel data analysis for the period 1990-2015. Our findings reveal that there is no significant relationship between remittances and growth. Yet, the study has empirically proved that growth is positively associated with gross capital formations and GDP per capita while it is negatively related with inflation and openness index.

What inflation measure should a currency union target?

What is the appropriate inflation target for the monetary policymaker in a currency union, core inflation or headline inflation? We answer the question in a two-country New Keynesian model with an energy sector. We derive the welfare loss function and find that optimal monetary policy should target output gaps, the terms of trade gap, the Producer Price Index inflation rates, and the real marginal cost gaps. We use the welfare loss function to evaluate two alternative Taylor-type monetary policy rules. We find that the choice of preferred policy rule depends on the shocks. Specifically, when productivity shocks hit the economy, the monetary policymaker should follow the headline inflation Taylor rule, while the core inflation Taylor rule should be followed when a negative energy endowment shock hits the economy. In our extended model in which a representative energy producer in the home country inputs domestic non-energy consumption goods to produce energy to meet the union-wide demands, we also find that the core inflation Taylor rule should be followed when a negative energy productivity shock occurs. In addition, whichever monetary policy rule the monetary policymaker chooses, the welfare level of home households is always lower than that of foreign households following a negative energy productivity shock.

In Search for Islamic Macroprudential Policy in Indonesia: The Case of Financing to Value (FTV) and Property Financing

This study aims to examine the impact of macroprudential policy particlarly the relaxing of Financing to Value (FTV) on property financing of Islamic bank in case of Indonesia. In addition, this paper also analyzes the impact of macroeconomic variables and specific factors on property financing in Islamic Bank. This paper collects data from the Bank Indonesia website, the Financial Services Authority (FSA) and the Central Statistics Agency (CSA) form January 2010 until April 2016. By employing Vector Error Correction Model (VECM), this study found that inflation and Industry Produce Index (IPI) have been positively influence on the property financing, while the BI rate and financing to deposit ratio (FDR) have been negatively influence on the property financing. While the relaxing of FTV policy also negatively influence on the property financing. Therefore, This study conludes that the policy have not effectived yet.

Incomes of population as a leading factor for the human potential formation and development

The article substantiates the multifaceted impact of population incomes on the human potential formation and development. The role and importance of human factor for the economy and society effective development is highlighted. The human potential in Ukraine was estimated by the integral index of the human development index. The Ukraine’s rating in terms of human development in the international aspect is analyzed. The place of our country in the world in the system of human development is determined. The latest trends in the sphere of human potential formation and development in Ukraine are highlighted. The income’s place and importance in the human development concept, the income’s relationship not only with the material, but also with the spiritual sphere of human activity, are investigated. The main current trends in the population incomes structure and dynamic are identified and analyzed. The wages role and influence on the human potential formation is revealed. The dynamics of nominal and real wages in Ukraine over the past seven years is analyzed. The dynamics of inflation index in the Ukrainian economy over the past five years is given. The main factors, which affecting the sharp decline in real incomes and population impoverishment in Ukraine, are formulated. The problems of incomes inequality of Ukrainians and their negative consequences for human development are investigated. The population incomes inequitable distribution and redistribution in our country is highlighted. The interrelation of the population excessive stratification by incomes with a society criminalization and economy shadowing is substantiated. The measures to the state income policy efficiency improving with the aim of human potential preserving and developing are proposed.

Services inflation dynamics and persistence puzzle in Brazil: a time-varying parameter approach

ABSTRACTThis article analyses services inflation dynamics in Brazil, focusing on the Services Inflation Persistence Puzzle, for monthly data from January 2004 to February 2016. We apply a time-varying parameter (TVP) approach, via a Kalman filter, to estimate hybrid Phillips curves and compare inflation inertia for tradable goods and services inflation. Aggregate Brazilian Extended Consumer Price Index inflation serves as a benchmark. To justify the TVP analysis, parameter instability and structural change tests are implemented, based on OLS and Generalized Method of Moments (GMM) frameworks. The main results are as follows: (i) the TVP approach is relevant due to observed instability in some parameters estimated; (ii) inflation expectation coefficients are higher than lagged inflation in all calculations, but inflation inertia is not negligible at all; (iii) services inflation persistence ranges from 27 to 36%, whereas tradable goods inflation persistence ranges from 36 to 47%, providing evidence of the Services Inflation Persistence Puzzle in Brazil; (iv) from 2009 onwards an increase in one percentage point in real wages raises monthly services inflation rate by 0.02 to 0.03 percentage point; (v) there is evidence that cost-push pressures, due to wage increases in the service sector, are more important to explain services inflation than demand pressures from early 2009 to mid-2014.

Macroeconomic Policies and Transmission Dynamics in India

Against the backdrop of the move to an inflation targeting monetary policy framework beginning 2014 with consumer price index (CPI) inflation as the nominal anchor, this paper revisits monetary transmission dynamics. Rather than confining to the typical three equation New Keynesian model, this paper assesses transmission in a broader, disaggregated model incorporating external sector, fiscal policy, banking sector and financial market variables to capture the interactions among key macroeconomic policies and macroeconomic aggregates. The empirical analysis confirms the role of monetary policy in containing demand and inflationary pressures. In view of the ongoing structural reforms, deregulation and opening up of the Indian economy, as well as ongoing initiatives in the monetary policy operating framework to improve the efficacy of monetary transmission, the transmission dynamics can be expected to evolve over time.

Systems Delivery Innovation for Alzheimer Disease

The authors describe a comprehensive care model for Alzheimer disease (AD) that improves value within 1-3 years after implementation by leveraging targeted outpatient chronic care management, cognitively protective acute care, and timely caregiver support. Using current best evidence, expert opinion, and macroeconomic modeling, the authors designed a comprehensive care model for AD that improves the quality of care while reducing total per capita healthcare spending by more than 15%. Cost savings were measured as reduced spending by payers. Cost estimates were derived from medical literature and national databases, including both public and private U.S. payers. All estimates reflect the value in 2015 dollars using a consumer price index inflation calculator. Outcome estimates were determined at year 2, accounting for implementation and steady-state intervention costs. After accounting for implementation and recurring operating costs of approximately $9.5 billion, estimated net cost savings of between $13 and $41 billion can be accomplished concurrently with improvements in quality and experience of coordinated chronic care ($0.01-$6.8 billion), cognitively protective acute care ($8.7-$26.6 billion), timely caregiver support ($4.3-$7.5 billion), and caregiver efficiency ($4.1-$7.2 billion). A high-value care model for AD may improve the experience of patients with AD while significantly lowering costs.

Islamic Banks’ Financial Stability and Its Determinants: a Comparison Study With Conventional Banks in Indonesia

<p><em>The research aimed to analyze the stability of Islamic banking industry and its determinants in Indonesia. The same analysis was also done to the conventional banking industry as Indonesia practices dual banking systems. Using monthly data on Indonesian Banking Statistics for 2008-2013, this research implemented the Banking Stability Index (BSI) model for predicting the bank's stability. The analysis began with measuring BSI then using VECM to examine the effect of variables on BSI. </em><em>The result showed that the BSI of both banking system was exhibiting the moderate level of stability though Islamic banking is </em><em>more stable and safe way of financing</em><em> than conventional banking. The shocks of inflation, exchange rate, efficiency, income diversity, liquidity, and Industrial Production Index responded positively by Islamic Bank' stability, while interest rate and market share responded negatively. In another hand, conventional bank' stability responded positively the shock of the exchange rate, income diversity, interest rate, liquidity, and market share, while other variables responded negatively. The results of shocking variables strongly indicated that the conventional banking is more vulnerable than Islamic banking. Islamic banking looked tend to the shock resistance and less volatile. This conclusion, however, might be still questioned as the BSI was not designed specifically for Islamic banking. </em><em>Therefore, constructing an Islamic BSI (under Islamic banking characters) was important to measure the banking stability more appropriate and to develop a proper early warning system for Islamic banking industry.</em></p>

Exogeneity of world oil prices to the Russian Federation’s economy and monetary policy

This research investigates the interrelationship between the Russian Federation’s main macroeconomic indicators, monetary policy and world oil prices using a vector autoregressive approach and monthly time-series data from January 1993 to December 2016. We selected the Russian Federation for this analysis because it is one of the largest oil exporting countries that is not a member of the Organization of the Petroleum Exporting Countries, and its oil revenues account for a significant proportion of the country’s total export and budget revenues. We assume that oil prices are exogenously given to this country, despite being a large oil-exporter, and explain the oil price transition mechanisms to the Russian Federation’s economy from the export side and through the fiscal channel taking into account the monetary policy factor. The results suggest that the impact of the oil price fluctuations on the country’s gross domestic product, consumer price index inflation rate, interest rate, and exchange rate was more significant between 2000 and 2016 than between 1993 and 1999. To estimate the monetary policy rule for the Russian Federation, we test the modified Taylor equation and associated Taylor rule, including the oil price gap, since the latter may have a significant impact on the key policy rate. The evidence suggests that the Taylor rule describes the post-financial crisis monetary policy of the Russian Federation relatively well.

Does Employment Respond Differently to Minimum Wage Increases in the Presence of Inflation Indexing?

The minimum wage literature focuses heavily on employment elasticity of minimum wage increases. In contrast, this study focuses on heterogeneity in minimum wage policy. Specifically, we study whether minimum wage increases lead to differential employment effects in states where minimum wages are indexed to inflation. We find evidence they do. To the best of our knowledge, this work is the first to empirically study inflation indexing. On balance, our results imply that the immediate disemployment effect of an increase in the minimum wage in a state that indexes its minimum wages to inflation is around three times the magnitude of the disemployment effect associated with a nominal increase in the minimum wage. Our finding is robust across both canonical and county-pair models, though it does not hold in our most restrictive specification. Examining the timing of the employment response reveals the disemployment effect associated with a change in the minimum wage is concentrated in the first 14 quarters after a state begins indexing minimum wages to inflation. [ABSTRACT FROM AUTHOR]

P-star model for India: a nonlinear approach

Abstract Inflation in India has been a major cause for concern in the recent past (2008–2012). This study examines the Indian wholesale price index inflation from 1951 to 2012 using P-star (or P*) models after accounting for the nonlinearities in the data by establishing the presence of a nonlinear long-run equilibrium. The paper establishes the presence of a threshold vector error correction model (TVECM) between prices and their long-run equilibrium with three optimal regimes to explain the short-run and long-run dynamics based on an error correcting transition term. Based on these results, the study classifies the various regimes that Indian inflation goes through based on historical economic events. The P* models (price gap, output gap and velocity gap models) were implemented regime-wise. The price gap models (output gap and income velocity gap determine inflation) were found to be optimal in the first and second regimes and consistent with theory. The velocity gap model (which has monetarist foundations) was found to be optimal in the third regime.

Market risk based capital for Brazilian insurance companies: A stochastic approach☆

Solvency II defines minimum capital requirements from insurance companies, due to their exposure to risk. Regulatory bodies of the Brazilian insurance market issued regulations based on a deterministic model for the calculation of risk based capital. In this study, we discuss a simple alternative stochastic model that may be more adequate to measure the minimum capital, based on an asset and liability management mechanism. By allowing the estimation of a probability distribution of losses, the model is useful to identify not only average results but also extreme results for the portfolio. Focusing on the market risk associated with interest rate exposures, we apply a stochastic model to investigate risks from a pension plan product of an insurance company operating in Brazil. The Brazilian case is relevant, since due to its high interest rate levels, high interest volatility and the usual investment in inflation–index bonds, deterministic models can poorly reflect the effective risk exposure of insurers. For the analysis of the actuarial liabilities, we use demographic data from the insurer. For the analysis of the assets, we investigate different hypothetical portfolios of investments in government bonds, analyzing how interest rates changes and indexes mismatch impact the potential loss. The results of the simulation of the stochastic model, for all scenarios, show potential losses that are substantially higher than the values established by the regulatory model. Estimate of potential loss can reach differences of up to 419%. The results suggest that the deterministic model defined by the regulatory agencies may be a fragile reference to the real capital needs of an insurance company, especially when considering the economic environment of emerging countries.

Phillips curve relationship in an emerging economy: Evidence from India

This paper revisits the issue of determinants of inflation in a major emerging economy in a Phillips curve framework against the backdrop of an intense global debate on the weakening inflation-output relationship, and makes two key contributions in relation to existing studies. First, with the Indian central bank moving towards a flexible inflation targeting framework based on the consumer price index (CPI) inflation, this paper is the first attempt in the Indian context to model dynamics of the CPI inflation. Second, in view of the recent international evidence that the observed flattening of the Phillips curve might more be an artefact of the national inflation rates being the target of monetary policy, and limited data span for the new CPI inflation series, this paper explores the Phillips curve relationship in India using sub-national data in a panel framework. The estimates in this paper confirm the presence of a conventional Phillips curve specification. Excess demand conditions have the expected hardening effect on inflation. Exchange rate movements are also found to impact inflation.

Analysis of the Main Aspects Regarding the Price Indices Applied in the Determination of Inflation

Inflation is the abridged or statistically synthesized form of price rises. Inflation can be expressed in the terms we commonly encounter in analyzes and daily studies as the consumer price index, which is nothing more than the evolution of the prices of the goods bought and of the tariffs and services used. It is, to put it this way, the main index or instrument for assessing inflation. However, a number of other indicators that are specific to the economic activity domains are used in the calculation of the consumer price index. Thus, we find the index of industrial production prices, the unit value of exports and imports, the cost of living index, the retail price index, the construction cost index, the agrifood product price index, or the average exchange rate index. All of these indicators that we have mentioned are used in inflation calculations in the sense that they are being discussed when it comes to determining how inflation is evolving. Inflation is an indicator that has negative effects on the real outcomes of economic activity and negatively influences the real value of the incomes of the population at one time. In calculating inflation, a number of issues have to be resolved, such as the definition of the calculated indicators, the advantages and disadvantages of the harmonization of the indicators mentioned the scope of each of them, the data sources and especially the most commonly encountered problem, the weighting system which we use. We know that there is an integrated household survey, family budget surveys, so that the data obtained can be processed so that they can present in a realistic way the evolution of prices within the national economy. Inflation is also important because once we know the concrete results; we can bring macroeconomic performance indicators as well as other sizes at a real comparability level. It is known that in the evolution of each period of time the macroeconomic indicators are calculated in the prices of the respective period, and then by deflation we manage to bring the indicators to a level of comparability. In the study, the emphasis is on solving these issues, so that specific inflation indices, such as the monthly inflation rate, the monthly average inflation rate, the inflation rate at the end of the period or year or the annual inflation rate, will be harmonize, correlate and put in place the possibility of making a realistic inflation calculation in the national economy. The Laspeyres or Paasche type weighting issue involves two issues that need to be considered when we build indicators that measure inflation.

The False Promise of Presidential Indexation

The Trump Administration faces mounting pressure from conservative thinkers and activists — including calls from its own National Economic Council director — to promulgate a U.S. Treasury Department regulation that indexes capital gains for inflation. Proponents of such a move — which is sometimes called “presidential indexation” — make three principal arguments in favor of the proposal: (1) that inflation indexing would be an economic boon; (2) that the President and his Treasury Department have legal authority to implement inflation indexing without further congressional authorization; and (3) that in any event, it is unlikely that anyone would have standing to challenge such an action in court. This Article evaluates the proponents’ three arguments and concludes that all are faulty. First, whatever the merits of comprehensive legislation that adjusts the taxation of capital gains and various other elements of the Internal Revenue Code for inflation, rifle-shot regulatory action that targets only the capital gains tax would be costly and regressive, would open a number of large loopholes that allow for rampant tax arbitrage, and would be unlikely to significantly enhance growth. Second, the legal authority for presidential indexation simply does not exist. The Justice Department under the first President Bush reached the conclusion in 1992 that the Executive Branch cannot implement inflation indexing unilaterally, and doctrinal developments in the last quarter century have — if anything — strengthened that conclusion. Third, a number of potential plaintiffs — including a Democrat-controlled House of Representatives, certain states, brokers subject to statutory basis reporting requirements, and investment funds whose tax liability could rise as a result of the regulation — would likely have standing to challenge presidential indexation in federal court. In sum, the promise of presidential indexation turns out too hollow, and calls for unilateral action should be spurned.

Scrotal circumference: A predictor of testosterone concentration and certain attributes of seminal vesicles influencing buffalo male fertility.

Aim:The aim of this study was to evaluate the relationship of scrotal circumference (SC) with plasma testosterone, seminal vesicles (SVs) weight, and its secretion as measurable indicators of fertility and also to sequence and establish phylogenetic relatedness of certain SV protein genes with other species as such integrated approach is lacking.Materials and Methods:Altogether, 59 apparently healthy male buffaloes sacrificed at slaughterhouse were selected (irrespective of breed) for measuring SC and collecting blood and paired SVs. The SC was measured at greater curvature using soft thread. In the present study, blood plasma testosterone, cholesterol, protein, and glucose in addition to SV fructose, citric acid and proteins in SV fluid were also estimated. The SV tissue was fixed in RNAlater for RNA extraction. Male buffaloes were categorized as per total SV weight into Group I (<5.0 g), Group II (5.0-7.84 g), and Group III (>8.0 g) and dentitions-I (≤18 months), II (18-24 months), and III (≥24 months) to assess the effect of weight and dentition age on SC, SV weight, and its certain secretions. Data were analyzed using linear model procedure including Tukey HSD test and Pearson’s correlation coefficient. Variance inflation and condition index were also used to assess multicollinearity.Results:Gross and histomorphological evaluation of SVs did not show any abnormality. Macronutrients (plasma protein, glucose, and cholesterol) showed non-significant (p>0.05) variation between groups. The SC and SV weight varied significantly (p<0.05) with a significant positive relationship with plasma testosterone, SV protein, fructose, and citric acid. In addition, testosterone concentration also showed increasing trend from Groups I to III but increased significantly (p<0.05) from Group II to III with positive and significant correlations with SV protein, fructose, and citric acid similar to SV weight and SC. Binders of sperm protein (BSP1, 3, and 5) genes (full length) were sequenced and established an evolutionary relationship which is lacking in buffalo.Conclusion:The present findings established a significant positive correlation of SC with that of other fertility parameters related to SVs weight and its secretions: Fructose, citric acid, and protein (inclusive of BSPs sequenced full length), and testosterone. Therefore, the present integrated approach along with certain semen quality attributes reflecting epididymis function could be used as a predictive fertility marker for grading and selection of breeding bulls and their progenies to develop outstanding bull mother farm.