Inflation Performance Research Articles

The relationship between exchange rate and inflation: the case of Western Balkans Countries

The paper investigates empirically the relationships between exchange rates and inflation in Western Balkan countries. The literature on the transition countries has recently focused on exchange rate as a shock absorber and downplayed its costs to macroeconomic stabilization. However, the decision to apply a different exchange rate regime depends on the costs and benefits in giving up an exchange rate instrument. With this in mind, the objective of this study is to determine whether fixed exchange rates play a significant role in inflationary performance or whether flexible exchange rates perform as a better shock-absorbing instrument in the Western Balkans. The result reveals that an exchange rate is still the main source of inflationary pressures in Western Balkan countries. Thus policy makers must weigh the relative costs and benefits associated with introducing a flexible exchange rate in small open economies because such regime is likely to incur more costs than benefits.

The Efficacy of Nigeria Monetary Policy: A Comparative Analysis

<em>This study assesses the efficacy of the Nigeria’s monetary policy against the backdrop of single digit inflation monetary policy target of the regulatory authorities. Two related questions were constructed to guide the study. Relying on both the Keynesian and Structuralist analyses, data were harvested on inflationary performance for 24 years on Nigeria economy from the World Bank data base and assessed it against achievement of the targeted single digit inflation. Thereafter Nigeria inflationary performance was compared with that of South Africa another leading African economy. It was realized that inflationary pressure on the South African economy was lower than that of Nigeria, even when both countries faced high inflation episodes during the early decade of 1990s. Findings which confirm the structuralist’s argument revealed that factors beyond the purview of monetary policy constrained the realization of single digit inflation. These include the existence of various and uncontrolled sources of liquidity in the country, government fiscal operation, which include financing of deficit budget and monetization of deficits, the existence of large informal credit markets, among others. Based on this, we recommend for concerted improvement of public infrastructure, the perfection of cashless economy programme, effective prosecution of war against corruption, and the creation of a single treasury account to help close leakages especially those linked to revenue accruable to government through MDAs and remittance to States and MDAs, among others.</em>

Inflation and Fiscal Deficits in Sub-Saharan Africa

Inflationary performance in sub-Saharan Africa since 1996 is examined. Median inflation has tended to be higher than in other regions of the developing world, such as MENA and Latin America. Inflation is highly persistent and is higher in countries that are less politically stable, in those without hard-peg exchange rate regimes, and in those with larger fiscal deficits. Inflation has declined over time, at least at the upper end of the distribution. There is no evidence that commitment devices such as inflation targeting have reduced inflation, but in SSA the sample is confined to two countries. Inflation typically spikes after a devaluation, and is sensitive to supply-side shocks. Movements in the real price of oil and rice (but not maize) have significantly affected the inflation rate. In countries that are poor in oil and minerals and therefore more reliant on agriculture, output growth is negatively correlated with inflation, presumably because, when the harvest is good and agricultural output is high, the extra supply reduces food prices. Fiscal balances also display considerable persistence and are more favourable in resource-rich and politically stable countries and in those with hard-peg exchange rate regimes, and have improved over time.

100 años de inflación y de presidentes de la Fed

This paper briefly analyses 100 years of inflation and presidency of the United States Federal Reserve since its creation in 1913. The first section addresses anti–inflationary performance and the second section revises the milestones of its presidents, while a final thought ends the paper. This work highlights inflationary, deflationary and stability price episodes, which created four monetary experiments: the Great Depression, the Great Inflation, the Great Moderation and the Great Recession. Episodes that occurred under the responsibility of leading figures which have lead the most influential monetary machinery in the word.

Exchange Rate Policy and Inflation in Acceding Countries: The Role of Pass-through

This paper analyzes the link between the choice of exchange rate regime and inflationary performance in four acceding countries to the EU: the Czech Republic, Hungary, Poland and Slovenia. The results allow a clear ranking of countries according to the size of the pass-through effect and the importance of exchange rate shocks to overall inflationary performance. In particular, perfect pass-through effect can be associated with accommodative exchange rate policy, which can moreover become the most important source of inflationary pressures. The analysis suggests that for CEEC-4 an early adoption of the Euro can provide the most efficient framework for reducing inflation.

L’influence du régime de change sur l’inflation dans les pays adhérents

Exchange Rate Pass-Through in Accession Countries by Fabrizio Coricelli , Boštjan Jazbec and Igor Masten This paper analyzes the link between the choice of exchange rate regime and inflationary performance in four EU accession countries : the Czech Republic , Hungary , Poland and Slovenia (CEEC-4 ). The findings generate a clear ranking of the countries by magnitude of pass-through effect and the importance of exchange rate shocks to overall inflationary performance . We find , in particular , that a perfect pass-through effect associated with an accommodative exchange rate policy can become an important source of inflationary pressure . The analysis suggests that early adoption of the euro could be the most effective way for the CEEC-4 to reduce inflation . Keywords : Accession to EMU , pass-through effect , I (2 ) cointegration analysis , policy trade-off

Inflation Targeting in the Context of Imf-Supported Adjustment Programs

This paper analyzes how an inflation targeting regimes relate with the conditioning established in the IMF assistance programs, and, in particular, with its inclusion within the performance criteria associated with that conditioning. The paper analyzes the Brazil's case, the first country in an IMF program to adopt an inflation target, and the lessons that can be derived from this experience. In its last section, we evaluate the idea of using Taylor rules to assess the inflationary performance. Simulations generated by the rule produces are not very similar to the effective policy rates, although differences diminish when expected inflation replaces current inflation within the rule.

Are exchange rate bands better than fixed exchange rates? The imported credibility approach

This paper explicitly incorporates exchange rate bands into the Barro-Gordon model of inflation. This is a non-trivial extension. Focusing on Markov-perfect equilibria, we specify the properties of the optimal policy functions, exchange rate dynamics and hence the arguments for and against target zones. The attractiveness of alternative exchange rate regimes (i.e. fixed, flexible and target zones) and the position of exchange rates inside the band depend on the inflationary performance of the center country.

Determinants of inflationary performance: Corporatist structures vs. central bank autonomy

Studies by economists have shown that countries with autonomous central banks experience lower inflation than others. (Banian, Laney and Willett, 1983; and Bade and Parkin, 1987). One reason for this may be that countries with autonomous central banks are less likely to monetize their deficits (Burdekin and Wahar, 1990). Studies by political scientists have used measures of the strength of corporatist structures to explain macroeconomic outcomes. (Cameron, 1984). However, neither economics nor political science research has employed measures of both central bank autonomy and the strength of corporatist structures to explain comparative inflation rates. The present paper tests whether measures of corporatist structures and central bank autonomy explain the comparative inflation performance of eighteen industrialized countries. This issue is of great importance for students of piecemeal monetary reform in countries where the central banking structure is susceptible to reorganization. The results of this paper should inform parties who are active in the reformation and reorganization of central banks in lesser developed and nascent market economics throughout the world.