Interaction Of Inflation Research Articles

Interaction of inflation and corruption in developing markets in the context of technological changes

Corruption being a multi-layer phenomenon has its direct and indirect effects on the economic life in different spheres. Taking into account this circumstance, we made an attempt to reveal the existing connections and dependence between corruption and inflation. Data of 161 countries were included in the carried-out analysis on inflation, corruption perceptions index (CPI), control of corruption index (COC), as well as Freedom of Corruption Index (FFC), whereas the countries have been divided into four large groups according to per capita GDP. Modern tendencies of the given groups of countries having strong foundations of institutional control or corruption «restraints» have been studied in this context. The correlation analysis has been carried out to study the dependence of corruption and inflation according to income groups. Research of previous experiences and results of the carried out analysis indicate that implementation of the efficient policy aimed at control of manifestations of corruption presumes some high level of institutional development in countries. Results of the correlation analysis prove the inverse relationship between corruption and inflation as well as its weaknesses for all income groups in countries.

The Phillips curve in agriculture: interaction of inflation and unemployment

The goal is to analyze the manifestation of the Phillips curve on practical material. Methods – comparative, systemic, statistical, classification. Results – the authors examine the relationship between inflation and unemployment from 1991 to 2021 in the Republic of Kazakhstan through the Phillips curve. The possibility of its application for Kazakhstan economy is considered. The relevance of the article is determined by the fact that in agriculture, depreciation of money and unemployment has negative impact in the form of disproportionate development, reduced investment activity, socio-economic instability, underproduction of gross product, and redistribution costs. This requires assessment of current trends in labor market, which is an indicator of living standard of population. The degree of inflationary processes (independent variable) and unemployment (dependent variable) in dynamics for domestic agricultural sector is analyzed. The relationship of human potential with the rate of decline in purchasing power is reflected. Using statistical data, Phillips curve was constructed for a longterm period. Correlation comparison of unemployment and increase in prices for goods and services has been carried out. The dependence between the studied variables for agro-industrial complex of the republic was tested. Conclusions – the results indicate the presence of relationship which is consistent with scientific concept of A. Phillips between inflation and unemployment in certain years. The periods when there is no feedback between them predominate. There is a simultaneous increase in inflation and unemployment and their decrease. However, even after 64 years, the Phillips curve, supplemented by the studies of E. Phelps and M.Friedman, is a tool for macroeconomic analysis, implementation of macroeconomic knowledge.

New evidence on credit channel of monetary policy transmission in India

This article examines a credit channel of the monetary policy transmission mechanism in India. One hundred thirty-two commercial banks in India were studied for ten years, from 2009 to 2018, using STATA for data analysis. The question of this study is: do bank features and macroeconomic variables combine to influence credit supply in India? According to the data, the bank's features have a large and negative liquidity ratio compared to the loan amount. Furthermore, there is a significant but negative relationship between the interaction of inflation and interest rates with the liquidity ratio and loan amount in India.

Exchange Rate Fluctuation and Inflation Nexus in Nigeria: The Case of Recent Recession

The erratic performance of the Nigerian economy has generated theoretical and empirical debate in the literature. For instance, while some scholars have posited that inflation and currency depreciation positively influence a country’s economy, others believe the contrary. This leads to the interaction of both the exchange and inflation rates to arrive at an innovative conclusion. Hence, this study examines the effects of both indicators and their interactive effect of the country’s performance in the regulation era between 1986 to 2019, using the autoregressive distributed lag estimation technique. The empirical findings reveal that the interaction of inflation and exchange rate has a negative impact on the economy in the short run, but it is positive in the long run. Thus, the monetary authority should proactively control the foreign exchange rate movement to curtail the recent surge in inflation and boost the performance of the country’s economy.

Inflation, extension and torsion analysis of compressible functionally graded hyperelastic tubes

Problems of inflation, extension and torsion of hyperelastic rods and tubes are of great interest for modelling and characterizing rubber-like materials and soft biological tissues. For incompressible and compressible hyperelastic tubes, analytical solutions for the problem of inflation, extension and torsion have not been proposed. In this research, the problem of inflation, extension and torsion of a functionally graded compressible hyperelastic tube is formulated as a one-dimensional problem and is solved using the finite difference method. First, the proposed method is verified against existing analytical and three-dimensional finite element method solutions. After that, by analyzing a number of problems over a wide range of variables, the interactions of inflation, extension and torsion are investigated.

Tax, Credit Constraints, and the Big Costs of Small Inflation

This paper develops an overlapping generations model incorporating credit constraints, owner-occupier and rental sectors, and detailed tax regulations to examine how the interaction of inflation and the tax system affect the housing market. It shows that even modest rates of inflation can have very large effects on the home-ownership rates of young households, particularly at low real interest rates. This occurs even if there is a large supply response in the quantity of housing. The model suggests that the welfare costs of inflation could be ameliorated by exempting the inflation component of interest payments from income tax.

Estimating Constant Growth Terminal Values with Inflation

In most corporate valuations the continuing, or terminal, value accounts for a majority of the total estimated value, but it is rarely given the attention it deserves. An exception is the work of Bradley and Jarrell (2008), who examine the impact of inflation on the constant growth model most commonly used to estimate the terminal value. They claim that standard constant growth models error by not properly accounting for inflation. Here we extend the work of Bradley and Jarrell and reconcile it with the traditional models. Our conclusion is that standard models work, but only if the terms are defined and applied consistently. It turns out that those consistent definitions are complicated by the interaction of inflation with accounting conventions. In particular, it is necessary to distinguish depreciable assets from non-depreciable assets and to contrast both with unrecorded intangible assets.

2D Chaos in the Interaction of Inflation and Unemployment: Moving Averages and the Modeling of High Frequency Macrodynamics

The paper argues that applicable macro is high frequency macro and the data generating process is therefore to be modeled in continuous time. It exemplifies this with a misuse of a 2D period model of monetarist type which becomes extremely overshooting, allowing for routes to “chaos,” when iterated at low frequencies. Instead of such low frequency procedures, we augment the model by a Keynesian feedback chain (the real rate of interest channel) to introduce local instability into the model. We also introduce heterogeneous opinion dynamics into it. The implied 4D dynamics are made bounded thereby, but seem to allow only complex limit cycles, with no transition towards strange attractors anymore.

Inflation effects on capital accumulation in a model with residential and non-residential assets

We study aggregate effects on capital accumulation of changes in the permanent rate of inflation in a model that incorporates both residential and non-residential capital. The framework is a dynamic general equilibrium life-cycle economy populated by heterogeneous individuals with respect to age, income and homeownership status. Inflation raises the non-residential capital income tax burden, affects the user cost of housing capital and raises the opportunity cost of holding money. A numerical analysis is provided based on parameter values from the US economy. We find that housing capital and inflation exhibit a positive correlation while inflation reduces savings in business capital. It is shown that this outcome arises from the interaction of inflation with individual tenure decisions and a number of characteristics and tax provisions available in the housing market.

Some Benefits Of Reducing Inflation In South Africa

This paper evaluates the welfare gain from permanently reducing inflation from two percent to price stability and compares it the output cost associated with this transition. The paper emphasizes the distortions caused by the interaction of inflation and capital income taxation in calculating the gain from moving to a zero rate of inflation. Though the annual deadweight loss of a two percent inflation rate is 0.225 percent of GDP - a relatively small number when compared to the literature, since the real gain from shifting to price stability grows in perpetuity at the rate of growth of GDP, the present value is a substantial multiple of the annual welfare gain. Calculations reveal a present value gain of 15 percent of GDP. Since the corresponding one-off output cost of moving from two percent inflation to price stability is 0.034 percent of GDP, the gain outweighs the cost by an overwhelming margin.

Shocking! Do forecasters share a common belief?1

We evaluate the interaction of inflation and growth forecast errors based on 17 distinct forecasts for the German economy for the period from 1970 to 2004. The forecasts were produced by 14 institutions. Our findings show that, in general, the forecasters did not share a common belief about the shocks driving the economy at the time at which they made their forecasts. We use a standard textbook aggregate-demand/aggregate-supply curve to identify the nature of the shocks expected by the forecasters. This exercise reveals that the forecasters have very divergent expectations regarding the nature of the shocks predicted to hit the economy in the coming year. Moreover, the lion's share of forecast errors can be attributed to unexpected demand shocks. 1The views presented in this article are those of the authors and do not necessarily reflect those of the DIW Berlin or the Deutsche Bundesbank.

The Welfare Effects of Inflation: A Cost-Benefit Perspective

This paper reviews theory and evidence of the welfare effects of inflation from a costbenefit perspective. Basic models and selected empirical results are discussed. Historically, in assessing the welfare effects of inflation, the distortion of money demand played a prominent role. More recently, interactions of inflation and taxation came into focus. Growth effects of inflation as well as welfare effects of unanticipated inflation and of inflation uncertainty are also addressed. To assess the policy question whether inflation should be reduced or eliminated, the costs of disinflation play a role. Finally, the trade-off between the benefits of reducing inflation and the costs of disinflation is discussed and an overall assessment of the net welfare effects of achieving price stability is provided.

Inflation, Capital Taxation, and Housing: The Long Run in a Small Open Economy

This paper deals with the consequences of inflation and capital income taxes for the accumulation of wealth in a small open economy with a housing sector. Particular attention is paid to the incentive and intergenerational redistribution effects stemming from the interaction of inflation and capital income taxation and to portfolio shifts between housing assets and other assets.

The Fisher Hypothesis, International Capital Markets and Taxes on Nominal Capital Gains

The paper extends to the closed economy the framework devised by Hansson and Stuart (1986) to analyze the interaction of inflation and taxation on the nominal rate of interest in a financially open economy. The paper generalizes Hansson and stuart and shows that their finding of a possible non-neutrality in inflation when international capital flows are introduced hinges upon the tax treatment of nominal capital gains, not specifically on whether the economy is financially closed or open. [023]

The efficiency of nominal and real tax systems

This paper analyses the interaction of inflation with nominal and real tax systems by incorporating each of a real tax system (which taxes only real asset returns) and a nominal tax system (which also taxes the inflation component) into the consumption capital asset pricing model. Abstracting from administrative costs, it is shown that a real tax system generally leads to a lesser distortion of consumption patterns and of asset returns than does a nominal tax system, even in an environment with zero expected inflation.

Inflation, Tax Rules and Investment: Some Econometric Evidence

This paper presents econometric evidence on the effect of tax incentives on business Investment in the United States in the period from 1953 through1978. The analysis emphasizes that the Interaction of inflation and existing tax rules has contributed substantially to the decline of business investment since the late 1960's.Because the investment process is far too complex for any simple econometric model to be convincing, I have estimated three quite different models of investment behavior. The strength of the empirical evidence rests on the fact that all three specifications support the same conclusion. More generally, the analysis and evidence show that theoretical models of macroeconomic equilibrium should specify explicitly the role of distortionary taxes, especially taxes on capital income. The failure to include such tax rules can have dramatic and misleading effects on the qualitative as well as the quantitative properties of macroeconomic theories. This paper was presented as the Fisher-Shultz Lecture at the Fourth World Congress of the Econometric Society, 29 August 1980, in Aix-en-Province.

Share values, inflation, and escalating tax rates

The interaction of inflation with a progressive tax system has been known to cause tax rates, and thus tax liabilities, to escalate with nominal income. Often blamed for having undesirable effects on investment and wealth, this feature of modern tax systems has not received formal treatment in the literature. The present study examines the impact of this inflation-related phenomenon upon the value of corporate equity within the framework of partial equilibrium. It is shown that the combination of moderate inflation and a mildly progressive rate structure may have a substantial adverse effect on share values, an effect sharply increasing with the firm's real growth rate. These results provide a partial explanation for the apparent conflict between the Fisherian hypothesis and the commonly observed inverse relationship between the rate of inflation and the deflated value of stock price indices. To the extent that occasional adjustment of tax schedules does not prevent taxpayers from being pushed toward higher tax brackets, these results suggest a sizable potential benefit from full indexation of tax rates in an economy suffering from chronic inflation. They also confirm the belief that failure to do so is expecially harmful to economic growth.

Inflation, Portfolio Choice, and the Prices of Land and Corporate Stock

This paper presents an explicit model of portfolio demand and uses it to show how the rate of inflation and its variances affect the real prices of land and of common stock. The analysis is thus an extension of two of the author's earlier papers which studied how the interaction of inflation and tax rules alter the real prices of land and stock. The analysis shows the importance of going beyond the traditional assumption that net-of-tax yields are equated for all assets.