Inflation Research Articles

Are Agricultural Commodity Prices on a Conventional Wisdom with Inflation?

The study investigates the mutual influence between agricultural commodity prices (ACP) and inflation (INF) in China by employing the bootstrap full- and sub-sample rolling-window Granger causality tests. We find that ACP has positive effects on INF, indicating that agricultural commodities play a significant role in stabilizing general price levels, but the higher ACP may create inflationary pressures. However, the negative effects suggest that under the shock of external uncertainty, the rise of ACP is not always regarded as the prime driver of INF. The results are not consistent with Hypothesis 1, which highlights that INF is positively affected by ACP. In turn, we also find positive and negative impacts of INF on ACP, showing that the level of INF can affect the supply and demand of agricultural commodity markets, it can be considered as a factor affecting ACP. The findings support Hypothesis 2 derived from the interaction mechanism. These analyses can assist the Chinese government to understand that ACP is not an effective indicator for forecasting INF. It also can prompt them to pay attention to the transmission effect of price levels on ACP, to maintain the stability of the agricultural commodity market.

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.

Measurement and Determinants of Financial Performance of Modaraba Companies: A Case Study of Pakistan

Purpose: Profitability measurement is a comparative statistic that describes the relationships between overall profit and other financial determinants of the firm.
 Design/Methodology/Approach: The focus of this study is to measure the technical (TE), pure technical (PTE) and scale efficiency (SE) scores via Data Envelopment Analysis (DEA) of modaraba companies operating in Pakistan. The next stage is to study the empirical relationship between profitability, liquidity, leverage, and macroeconomic performance drivers. Financial statement data for 2010 to 2019 have been analyzed.
 Findings: Empirical findings of descriptive statistics, correlation and regression were measured. These empirical results reveal that capital ratio (CR) and operating expenses to net income (OENI) had negative correlation with PTE, SE and TE. Whereas the age of the firm had a negative correlation with PTE and TE and positive correlation with SE, moreover, exchange rate (EXC) PKR to USD, log of total assets (LTA) and management expenses (ME) had negative correlation with SE and positive correlation with PTE and TE. Furthermore, inflation (INF) had negative correlation with PTE and positive correlation with SE and TE. Moreover, number of certificates (NOC) had negative correlation with SE and TE and positive correlation with PTE.
 Implications/Originality/Value: Findings will be helpful to the management and policy makers for enhancing future financial performance by concentrating on these economic factors. More detailed and extensive data from the financial and non-financial aspects is suggested to support the hypothesized relationship of efficiency measures and determinants.

CAUSAL RELATIONSHIP OF ENERGY CONSUMPTION AND ECONOMIC GROWTH – A CASE STUDY OF PAKISTAN

This paper explores the causal relationship between energy consumption and economic growth in Pakistan, applying techniques of co-integration and Hsiao’s version of Granger causality, using time series data over the period 1965-2019. Time series data of macroeconomic determi-nants – i.e. energy growth, Foreign Direct Investment (FDI) growth and population growth shows a positive correlation with economic growth while there is no correlation founded be-tween economic growth and inflation rate or Consumer Price Index (CPI). The general conclu-sion of empirical results is that economic growth causes energy consumption.

On Possible Macro Consequences of Society Aging: Economic and Statistical Analysis on the Basis of National Transfer Accounts

The article discusses research results of socio-economic challenges in modern society using selected international statistics and presented in the format of National Transfer Accounts (NTA) as a follow-up to the author’s prior publications in the journal «Voprosy Statistiki» (Issues 4 and 11 of 2019; Issue 5 of 2020). Introduction to the article rationalizes the subject matter topicality both given the pressing problem of ageing of modern society and in connection with the necessity of practical adoption of National Transfer Accounts in the system of Russian statistics as a coherent derivation and elaboration of the System of National Accounts (SNA), expanding analytical capabilities of statistics. Going into the main part of the article, the author applies statistical methods to explore the key macroeconomic consequences of the global ageing of modern societies. The article provides evidence that macroeconomic challenges and risks to sustainable development emerge primarily in the countries featuring low birth rates, a high share of seniors, and significant levels of government support to the households. The author studies how shifts in the population age distribution translate into changes in consumer spending and incomes. The article presents and analyzes initial findings of the quantitative evaluation of these correlations based on historical data on healthcare expenditures and per capita labor income. The paper identifies the factors and the extent of their impact on how people choose the economic behavior model that ultimately determines the volume and structure of consumption in high inflation economies. Finally, the article lays down a number of conclusions to the following essence: (1) empirical estimates confirm the hypothesis that ageing society presents a heavier «economic burden» for the government finances rather than for the economy as a whole and (2) further advances in macro-statistic work (SNA core sections, National Transfer Accounts, satellite accounts within SNA) become increasingly important for expanding analytical capabilities required to seek for a more effective mechanism to build-up and utilize national resources in the face of population ageing.

Determinant Factors of Non-Performing Loan among Non-Bank Financial Intermediaries in Malaysia

This study aimed to investigate the determinants of non-performing loans (NPLs) using a case of the Non-Bank Financial Intermediaries (NBFIs) in Malaysia during the period from 2009 to 2018. The study revealed that the level of NPLs can be attributed to both NBFI-specific factors (internal factors) and macroeconomic factors. The assessments on panel data analysis were done using STATA software. The results show that NBFI size, Profit (ROA), Lending Interest Rate (IR), and Inflation (INF) have a significant positive relationship with NPLs. The findings reveal that NPLs tend to increase with the deteriorating bank’s efficiency. The larger the NBFI size, higher profit, and high interest contribute to the increment of NPLs. Meanwhile, NPL also increases due to the change in economic condition, particularly with a rise in inflation rate. Hence, for NBFIs to decrease their NPLs, they should consider these factors during the lending process.

Role of institutional quality in economic development: A case study of Asian countries

The paper investigates the impact of institutional quality on economic growth by taking 48 countries in Asia between 2005 and 2018. By using the quantile regression methods with panel data, institutional quality is found to be a key factor of economic development. However, in the lower-income Asian countries, the institution with better quality appears to promote the growth more effectively than in the higher-income ones. Moreover, the paper also finds out a nonlinear relationship between institutions and economic growth. The results show that there is an institutional threshold for economic growth to reach its highest level. If the institution indicator exceeds the threshold, it causes the reverse effect on the growth. Moreover, the economic growth of Asian countries is also affected by inflation (INF), labor force (LABO), trade openness (OPEN), and infrastructure (TELE). From that, the study suggests some policy implications for Asian countries and Vietnam, in particular, in order to improve institutions contributing to economic growth.

Assessment of Macroeconomics Determinants on Islamic Banking Profitability and Liquidity in United Arab Emirates and Tanzania

Aims: This paper studies the determinants of Islamic banking profitability and liquidity in the United Arab Emirates (UAE) and Tanzania. It was comparative study. The study gives empirical comparisons between Islamic banks in United Arab Emirates (UAE) and Tanzania in their performance bases.
 Study design: This study covers the samples of five (5) Islamic banks where by two (2) banks from Tanzania that are People Bank of Zanzibar in Islamic branch (PBZIB) and Amana Islamic bank (AIB). In the side of United Arab Emirates (UAE) three (3) Islamic banks were selected which includes Dubai Islamic Bank (DIB), First Abu Dhabi Bank (FAD) this is not an IB and Emirates Islamic Bank (EIB).
 The study used secondary data of selected variables which employing panel data for the period of ten (10) years from 2010- 2019. Due to data was on panel bases which includes the two independents variables.
 Methodology: To calculate profitability, the Return on Assets (ROA) was used and in liquidity in IBs deposit ratio (LDR) used to measure the liquidity .The study uses descriptive statistical analysis, correlation, multiple regression analysis for two equations according to settled objectives. The three macroeconomic variables were selected that are Gross Domestic Product per capita (GDP), inflation (INF) and exchange rate (EXCH). An autoregressive distributed lag (ARDL) model was applied because the result becomes mixed in the unit root test.
 Results: The findings reveal satisfactory evidence that all selected variables are statistical significance in long run relationship except inflation in UAE. The outcomes of the study indicated that selected macroeconomic variables (GDP per capita, Inflation and exchange rates have a major 5% effect on bank profitability and liquidity in Tanzania and the United Arab Emirates.
 Conclusion: The study therefore recommends the Tanzania Islamic banks should adopt several policies in order to control the liquidity which is very difference like UAE banks.

Triangle of Environment, Water and Energy: A Sociological Appraisal

Triangle of Environment, Water and Energy: A Sociological Appraisal

EFFECT OF EXCHANGE RATE VOLATILITY ON UGANDA'S TRADE BALANCE

This study examines the long-run and the short-run relationship between the real exchange rate, GDP, FDI, inflation (INF), gross capital formation (GCF), Net official's development assistance (NODA), GNI, and trade balance in Uganda for the period 1994-2018. We used an Augmented Dickey-Fuller (ADF) test for the stationarity test, and we use the Johannsen cointegration approach to prove the existence of cointegration. The ADF tests show that the series was non-stationary in level but became stationary after the first difference. The Johannsen cointegration test indicates the long and short-run relationship between all the explanatory and trade balance in Uganda. Under such circumstances, a Vector Error Correction Model (VECM) is employed since the results offer more information than other data generation processes. Our findings are as follows: Real exchange rates, FDI, GCF and have a positive relationship with Trade balance. It means that Uganda can depreciate the Exchange rate to improve its Trade balance. The results proved the J-Curve effect's existence (i.e., the long-term impact of exchange rate on trade balance). The recommendations from this study are - Uganda's monetary policy management should emphasize more efforts on the stability and minimization of the volatility of exchange rates of the shillings since its movements affect international prices both negatively and positively, leading to either a decline or trade boost.
 Keywords: Trade balance; Real exchange rate; Net official's development assistances; GNI; VECM model; Uganda

World Economic Prospects Monthly

Overview: Service sector takes over the growth baton ▀ We have nudged up our world GDP growth forecast for 2021 to 6.4% from 6.3% previously and continue to expect a healthy gain of 4.6% in 2022. Our above consensus outlook for global economic growth both this year and next continues to be supported by recent activity developments. ▀ Recent news on Covid cases have been positive, as global case numbers are almost back down to their March lows, and economic data have continued to consistently beat economists' expectations on the upside. Business surveys indicate that the healthy rebalancing of the global economy away from manufacturing and towards services is continuing. The global services PMI remains comfortably ahead of the manufacturing headline index for a second consecutive month after rising in May. ▀ We continue to expect a strong global growth rebound in Q2 as the Chinese economy regains momentum and advanced economies benefit from a relaxation in activity restrictions and the resulting release of pent‐up demand by households. Non‐Chinese emerging markets are likely to see GDP growth slow in Q2 because of a surge in Covid cases, most notably in India, but growth should improve in H2. ▀ We have raised our CPI inflation forecasts to reflect the strengthening recovery, supply bottlenecks, and rising cost pressures. At a global level, we now expect inflation to average 3.8% this year, the strongest annual rise since the 2011/2012 period. ▀ Although there has been plenty of talk about a new inflation regime, we still think there is only a small chance of the current inflation pick‐up marking the start of a sustained period of high inflation. For most economies, we continue to believe the current rise in inflation is a response to temporary supply and demand dynamics that will start to subside as we move into 2022.

Gender roles produce divergent economic expectations

Expectations about economic variables vary systematically across genders. In the domain of inflation, women have persistently higher expectations than men. We argue that traditional gender roles are a significant factor in generating this gender expectations gap as they expose women and men to different economic signals in their daily lives. Using unique data on the participation of men and women in household grocery chores, their resulting exposure to price signals, and their inflation expectations, we document a tight link between the gender expectations gap and the distribution of grocery shopping duties. Because grocery prices are highly volatile, and consumers focus disproportionally on positive price changes, frequent exposure to grocery prices increases perceptions of current inflation and expectations of future inflation. The gender expectations gap is largest in households whose female heads are solely responsible for grocery shopping, whereas no gap arises in households that split grocery chores equally between men and women. Our results indicate that gender differences in inflation expectations arise due to social conditioning rather than through differences in innate abilities, skills, or preferences.

A nexus between macroeconomic dynamics and trade openness: moderating role of institutional quality

PurposeFirst, the current study contributes to the available debate by reinvestigating the impact of economic growth (EG), foreign direct investment (FDI), technological innovation (TI) and inflation (INF) on trade openness (TO). Second, the study tests the moderating role of institutional quality (INS) on the relationship among EG, FDI, TI and TO. Third, the study tests how TO contributes to EG efficiency.Design/methodology/approachThe study collects the data from the group of twenty (G20) economies for the period of 1998–2020. The study applied the Kao (1999), Pedroni (2001), and Palamuleni (2017) cointegration tests to test the long-run association between variables. The study applied fully modified least square (FMOLS) and dynamic least square (DOLS) models to test the hypotheses.FindingsFindings of the study showed the positive impact of EG, FDI and TI on TO, which becomes more positive in the presence of institutional quality. Results indicate that INS plays an enhancing role in the relationship between FDI and TO, EG and TO and TI and TO. The study showed a negative relationship between INF and TO, and institutional quality plays a buffering role in the relationship between INF and TO.Originality/valueFirst, the study reinvestigates the empirical association among EG, FDI, TI, INF and TO. Second, the study tests the moderating role of INS on the relationship between the proposed variables by developing an index of all the indicators of INS. Third, the study tests the contributions of TO in economic efficiency (ECE). The contributions of the present study will increase the available literature of TO and help the policy makers of G20 nations to suggest important policies to promote TO and ECE.

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.

Effect of macroeconomic variables on Jakarta composite index before and the time of COVID19

The aim of this study is to examine the effect of macro-economic variables on the Jakarta composite index in Indonesia, both in the short and long term before Covid19 and the Covid19 period, as well as to examine whether there is a difference before Covid19 and the Covid19 period. Macroeconomic variables include exchange rate (ER), inflation (INF), interest rate (INT) and output growth (IP). This study uses data from the times series for the period 2019.1 to 2020.12 by including dummy variables. The first stage is to test the stationary of the data with the root test unit, and the result is that the data is only stationary in the first and second differences. In addition, the co-integration test between the variables and the results shows a co-integration relationship between the variables so that the model can be analyzed using the Error Correction Model (ECM) to see the short-term balance. The results of the ECM model analysis show that, in the short term, the only macroeconomic variables affecting the Jakarta composite index in Indonesia prior to Covid19 and the Covid19 period are only the exchange rate. In the long run before Covid19, the only ones affecting the Jakarta composite index were the exchange rate, while the eCovid19 period was the rate of exchange and inflation. Other results indicate that there is a difference in the average.

The impact of stock market on enterprise capital structure in ASEAN developing countries

Capital structure is one of the topics in which business managers as well as academics are always interested, because it has many important implications. This problem in developing countries is even more relevant due to the low level of financial development in these countries, leading to uncertain access to external capital by firms. This paper focuses on the impact of stock market development on capital structure in five developing countries in ASEAN, namely Indonesia, Malaysia, Philippines, Thailand and Vietnam, for the period 2010 - 2018. Stock market development is measured in four different ways: Stock market capitalization to GDP (MACAP), total value of shares traded to GDP (LIQ1), total value of shares traded to stock market capitalization (LIQ2) and average of the three indexes (STOCK). The results show that development of stock market has different impacts on capital structure, depending on the measures used to reflect the stock market development. Specifically, MACAP, LIQ2 and STOCK do not reach statistical significance, while LIQ1 has a negative effect. In addition, firm size (SIZE), tangible assets (TANG), growth opportunities (TOBINQ), inflation (INF) and GDP growth (GDPGR) positively affect capital structure; while firms' profit (ROA) has negative effect. Based on the research findings, the research offers several implications for relevant stakeholders.

The Winters of Our Discontent and the Social Production Economy

ABSTRACT The economic policy reaction to the Covid-19 crisis has been considered from different angles. Here I will remind only the positions by Draghi (looking at this historical conjuncture comparing it to ‘war times’), Tooze (seeing in it the definitive closure of the ‘political economy of inflation’ as well as ‘the first crisis of Anthropocene’), Kregel (proposing ‘central controls for social provisioning’ as the pertinent macroeconomic policy). The pandemic could inaugurate a game change in European economic policy; and even unlikely quarters suggested in the last year a retreat from neoliberalism as we knew it. However, the health crisis is not an exogenous shock: it is inherent in the capitalist social form of production and consumption. The pathological state of affairs that takes our breath away reveals the hidden reality of the society where we work and consume. Confronting the current and future virus outbreaks (as well as climate change) obliges us to go back to the founding themes of macroeconomics, which needs to consider not just the level of employment, but also what employment is for. In this logic, we are forced to radicalise the notion of the ‘socialisation of investment’ into that of a ‘social production economy’: the challenge in front of us is indeed about the ‘how’, ‘what’, ‘how much’ and ‘for whom’ to produce.

Makroekonomik değişkenler ve içsel faktörler ile bankaların finansal performansı arasındaki ilişki: Türkiye için ampirik bir araştırma

Bu çalışmanın amacı Borsa İstanbul (BIST)’da faaliyet gösteren bankaların finansal performansı ile makroekonomik değişkenler ve içsel faktörler arasındaki ilişkiyi araştırmaktır. Bu amaçla BIST’de faaliyet gösteren bankaların 2005-2017 dönemine ilişkin verileri analiz edilmiş ve regresyon yöntemi kullanılmıştır. Bankaların finansal performans göstergeleri olarak aktif karlılık oranı (ROA), öz kaynak karlılık oranı (ROE), Tobin’s Q (TOBIN) oranı ve fiyat/kazanç (F/K) oranı araştırmada yer almış olup, çalışmanın bağımlı değişkenleridir. Makroekonomik değişkenler olarak enflasyon ve işsizlik kullanılmıştır. Toplam aktifler, finansal kaldıraç ve yaş değişkenleri araştırmanın içsel faktörleridir ve makroekonomik değişkenler ile birlikte araştırmanın bağımsız değişkenlerini oluşturmaktadır. Araştırma sonuçlarına göre finansal performans göstergeleri olan aktif karlılık oranı (ROA), öz kaynak karlılık oranı (ROE), Tobin’s Q (TOBIN) oranı ve fiyat/kazanç (F/K) oranı toplam aktifler, finansal kaldıraç ve yaş değişkenleri ile istatistiki olarak anlamlı bir ilişkiye sahiptir. Buna karşın söz konusu finansal performans göstergeleri ile makroekonomik değişkenler arasında anlamlı bir ilişki tespit edilememiştir. Tahmin edilen tüm modellerde finansal performans göstergeleri ile toplam aktifler arasında anlamlı ve pozitif yönlü bir ilişki tespit edilmiştir. Finansal performans göstergeleri ile finansal kaldıraç oranı ve yaş arasında negatif yönlü bir ilişki bulunmaktadır. Buna göre bankaların toplam aktiflerini istikrarlı bir şekilde büyütmeleri bankaların finansal performansını olumlu yönde etkilemekte ve karlılığı arttırıcı bir faktör olarak öne çıkmaktadır.

Strategic management of competitiveness in regional spatial and sectoral structures under modern conditions

The article summarizes the results of the research conducted and theoretical and methodological approaches in strategizing and strategic management with considering the development principles. The author introduces the model of strategic management of spatial development based on the chaos theory of infl ation in the economic environment. The article also defi nes the notion of “structurizing” as a sort of strategic management. The design of economic structures is considered as the implementation mechanism for the strategy developed according to the balanced scorecard (BSC) methodology. The article reveals the specific features of maintaining the competitiveness of a regional spatial and sectoral structure from the viewpoint of sustainable development concept. The author suggests the SEEIT-method of analysis and synthesis to evaluate the competitiveness level from the spatial and sectoral perspective (analysis) and create competitive advantages of regional spatial and sectoral structure (synthesis). The author’s definition of sustainable development provides the basis for formulating a concept of transient competitive advantage which meets the modern conditions of competition.

Main Determinants of Banks’ Stability: Evidence from Commercial Banks in Ghana

This study focuses on the main determinants of the stability of commercial banks in Ghana. The work was guided by three objectives, namely investigating the firm-specific, board characteristics and macroeconomic variables that determine bank stability in Ghana. This study used panel data, sourced from 8 banks over 2008-2017, constituting 80 observations. Firm-specific and board-characteristic data were sourced from the selected banks through their audited financial statements. Data on macroeconomic variables were sourced from World Development Indicators, 2018 and Bank of Ghana. The study, through Hausman specification test, selected appropriate models for estimations. STATA 13.0 was used for the data analysis. From the findings, bank size and net profit margin had significant positive effects on bank stability whilst interest cover had a negative significant effect on banks’ stability. Also, characteristics, gender of CEO, board size and frequency of board meeting there was a significant positive effect on bank stability. With regards to macroeconomic variables effect, inflation and growth of gross domestic product had significant positive impact on banks’ stability. Bank rate had a significant negative impact on bank stability. The study therefore recommends that, the commercial banks in Ghana should embark on reasonable expansion. They should also ensure effective and efficient utilization of all banks' assets. The banks should further constitute a reasonably board size, made up of different expertise. Government of Ghana should consciously embark on accelerated economic growth, supported by sound economic fundamentals.