Monetary Inflation Research Articles

Unionist vs. Nationalist: Potential Re- emergence of Identity Crisis in Post-Brexit Northern Ireland

As the world begin to enter another decade of the third millennia, Europe has been struck with various challenges that greatly affects its surrounding geopolitics that, depend on the path further taken, would decide its future: whether maintaining solidarity and regional ‘fraternity’, typically in context of European Union (EU), or towards complete jeopardy and dissolution of the long-lasting union that has been tighten since the end of the Second World War. However, preference of member-states is beginning to drift away to the latter as crisis and problems continue to spring, both internally, such as cases with Greek’s monetary inflation, and externally, concerning massive influx of refugees coming from the Middle East and Africa. As suggested by constructivism, the key of successful resolution depends on the intensity of diplomatic communication. By doing so, both countries should have deep understanding of each other’s perspective. In addition, views and interest of Unionist and Nationalist side should be taken into account for in mitigating possible rise of new conflict.

A MONETARY ANALYSIS OF GHANA: EXAMINING THE IMPACT AND THE CAUSAL RELATIONSHIP BETWEEN MONETARY POLICY AND INFLATION IN GHANA

Purpose: The main objective of the study was to examine the impact and the causal relationship between monetary policy and inflation in Ghana.Methodology: Annual time series data spanning from 1985 to 2017 with Auto Regressive Distributed Lagged (ARDL) model were employed for the analysis.Findings: The outcome from the study shows that, monetary policy rate had insignificant negative relationship with inflation in both the short and the long run. Again, interest rate, domestic investment and money supply were found to have significant positive impact on inflation in both the long and the short run for a specific period chosen for the study.The causal relationship shows that monetary policy rate granger causes money supply within the period understudyUnique contribution to theory and practice: The study recommends that policy makers need to keenly consider the levels of money supply in Ghana so as to ensure a stable retail price levels. The Government of Ghana needs to evaluate the prevailing levels of retail prices and set the interest rates on the 91-day Treasury bills because they are majorly treated as risk free rate hence determines other interest rates and inflation levels in Ghana.

Monetary Policy and Inflation Compensation

We use two market-based measures of inflation compensation to explore the transmission mechanism of monetary policy to inflation markets. New information about the Fed's monetary policy stance becomes available on the days of meetings of the Federal Open Market Committee (FOMC) and is reflected in asset prices. We measure the sensitivity of inflation compensation measures to changes in monetary policy and compare its magnitudes across different maturity horizons, and across conventional and unconventional monetary policy regimes. Our analysis reveals that risk premia embedded in inflation compensation are horizon and monetary policy regime dependent.

Monetary Policy Surprises and Inflation Expectation Dispersion

Monetary Policy Surprises and Inflation Expectation Dispersion

Monetary Policy and Inflation Targeting in Nigeria: The Need for Monetary-Fiscal Coordination

This paper examined the effectiveness of a monetary-fiscal coordination in inflation targeting in Nigeria for the period 1985 to 2019. The study got its inspiration from the monetarist assertion that inflation is strictly a monetary phenomenon. Data were obtained from the Central Bank of Nigeria statistical bulletin and the World Bank database on World Development Indicators. The study employed the Augmented Dickey-Fuller unit root test, ARDL bounds test for cointegration, and the Error Correction Mechanism (ECM). The unit root test revealed that the variables were stationary at mixed order of level I(0) and first difference I(1). This mixed order made us to employ the ARDL Bounds test for cointegration and the result indicated that there is a long run relationship. The Error Correction Mechanism revealed that 55.4% of the short run disequilibrium is corrected annually. Meanwhile, the study revealed that both monetary policy channels and fiscal policy significantly influence inflation both in the long run and in the short run. The paper concludes by stating that there is a need for a sound monetary-fiscal coordination in the Nigerian economy if the fight against inflation is to be won hence, inflation should not only be viewed as a monetary phenomenon.

A Model of Economy Operation Under Currency Market Rate

A model of functioning of an open economy with a currency market is presented. It allows determining macroeconomic indicators in the medium term with the Central Bank monetary regulation of the amount of money in circulation, interest rates, and the ratio of cash to demand deposits and under governmental regulation of reproduction of the capital available in production. The currency rate is determined by the function that is directly proportional to monetary inflation and real consumer demand and is inversely proportional to the currency intervention of the Central Bank and transactions.

Inflation and Profitability of Commercial Banks in Rwanda: A Case Study of Bank of Kigali

The study evaluates the impact of inflation on the profitability of commercial banks in Rwanda with specific focus on the Bank of Kigali. In Rwanda, the effect of inflation on the financial performance of commercial banks has not been adequately researched in relation to types of inflation. It is against this issue that the researcher wanted to carry out this research to find the relationship between inflation and profitability of commercial bank in Rwanda. The specific objectives of study were: to examine the trend of inflation in Rwanda; to examine the profitability of Bank of Kigali between 2011 and 2015; and to establish the relationship between inflation and profitability. To achieve objectives study used descriptive research design with population and sample size of 26 respondents. Correlation analysis is used to examine relationship between study variables. The study findings revealed that cost push inflation has positive high correlation to the Profitability of BK. Findings indicated that demand pull inflation and Monetary inflation has also positive high correlation profitability of Bank of Kigali. Finally it is concluded that the types of inflation affect commercial banks are cost push inflation, demand pull inflation and monetary inflation. Inflation has a significant role in enhancing commercial bank’s profitability.

Monetary Policy, Capital Mobility, Inflation, and Wages in Eastern European Economies: Selected Papers from the International Conference “Economic Turmoil in Contemporary Europe III”

The four papers in this issue of Eastern European Economics relate to the third international conference “Economic Turmoil in Contemporary Europe” organized by the Department of Econometrics at Laz...

Openness, Inflation and Output Under Alternative Monetary Policies: A Structuralist Approach

This article theoretically revisits the issue of how trade openness and inflation are interconnected in the light of conduct and optimal design of monetary policy. Central banks in open economies all over the world face a problematic dilemma when it comes to providing a nominal anchor to the economy in the sense that they have to choose between monetary targeting and inflation targeting. The experience has been varied worldwide with respect to these alternative policies in containing inflation. Different dimensions of openness like fully flexible exchange rate and capital mobility have also had significant impacts on the outcomes of policy changes. In this paper, we have constructed two theoretical open macro-economy models using the AD-AS framework under regressive expectations. The first model considers interest-rate targeting incorporating Taylor rule, whereas the second one deals with monetary targeting. The models show that alternate monetary policy rules do not change the basic results of different macroeconomic policies, although the underlying transmission mechanisms are quite different. JEL Codes: E12, E31, E43, E52, F41

Inflation and the Boom-Bust Cycle in Corporate Leverage

Financial engineering is an art, not a science. The core of the subject is how to camouflage increases in leverage as the source of raised earnings on equity capital. This article explores how and why demand for financial engineers grows globally under the influence of inflationary U.S. monetary policy and how a boom in their profession contributes importantly to the potentially devastating effect of monetary inflation on economic prosperity. It proceeds to consider the extent to which foreign countries, large or small, would take steps to counter their vulnerability to the financial engineers, with particular reference to the case of the emerging markets and Japan who have experienced at times the maximum impact. Of course, the most effective defense is monetary, but for many reasons detailed here, this has rarely been implemented.

The Game of Monetary Policy, Inflation and Economic Growth

Ghana has been confronted with series of economic problems to the extent of calling on the IMF for a bailout after every eight years. This situation has persisted in spite of various monetary authority stabilization policies. This paper therefore focuses on investigating the games of monetary policy, inflation and economic growth of the Ghanaian economy for the period of 1982-2017. Using Autoregressive Distributed Lag (ARDL) to cointegration model, it was revealed from the study that in the long run interest rate significantly influences economic growth but in a negative direction, implies that a higher interest rate has the tendency to restrained economic growth and inflationary pressures. In relation to exchange rate, the long run result indicates an insignificant negative effect on economic growth. The general results suggest that macroeconomic variable which influences economic growth is interest rate and exchange rate. This is evidence that macroeconomic instabilities have significant effect on economic growth. This therefore calls for fiscal discipline and autonomy power to the Bank of Ghana with less interreference from the government to enable the smooth implementation of monetary policies without any string of politics attached.

Crude oil price shocks and macroeconomic performance in Africa’s oil-producing countries

The study investigates the influence of crude oil price shocks on the macroeconomic performance of Africa’s oil-producing countries. Eight major net oil producers, namely, Algeria, Nigeria, Egypt, Angola, Gabon, Equatorial Guinea and Congo Republic are included in the study. Sudan is excluded due to data constraints. The study covers the period between 1980 and 2016, which represents the periods with the most boom and bust movements in crude oil prices. The Hamilton Index (1996) which uses the net oil price increase is applied. The study compares the price of oil in each quarter with the maximum value observed during the preceding four quarters. This is used to derive sharp increases and declines in oil prices to capture oil price shocks. A Panel Structural Vector Auto-Regression model is adopted for analysis. The results show that the reaction of output to sharp increases and declines in oil prices differ. It is also observed that structural inflation accompanies sharp declines in oil prices more than monetary inflation, since both outputs and investment decline significantly.

Non-Neutral Money: A Market Process Perspective

Abstract This article studies the impact of a credit expansion monetary policy on output and unemployment rate. In the introduction the history of the Phillips curve and its interpretation are presented to understand why New Consensus Macroeconomics argues that monetary policy is neutral in long-run i. e. has no effect on economic activity and natural unemployment rate. This New Consensus Macroeconomics supports the independence of the Central Bank, inflation-targeting and the strategy of constrained discretion model and influences strongly the monetary policy of central bank today. The second section critics these three principles of the new consensus. It opposes free-banking to central banking system, and takes the defense of deflation to critic the inflation-targeting. Then the third section deals with long-run neutrality of monetary policy. In an Austrian Business Cycle perspective, there is neutrality of monetary only if the production structure must always return exactly to its level of before the boom. It is improbable, because the monetary policy via tax inflation and artificial variation of real interest rate has a long-run effects on the conditions of financing of entrepreneurial project and in fine all the market process dynamic.

Goods Inflation, Asset Inflation, and the Greatest Peacetime Inflation in the US

In every episode of global monetary inflation originating in the Federal Reserve, we find both asset price inflation and goods inflation. The interrelationship between these two types of inflation depends both on cycle-specific factors and more general factors which transcend the cycle and stem from essential aspects of monetary disorder. The purpose of this article is to analyse the nature of this interrelationship and elaborate on the concepts of monetary disorder, goods inflation, and asset inflation. In today’s world of monetary systems where there is no stable demand for high-powered money (which itself is no longer a highly distinct asset) monetary disorder can be hard to recognize until quite late in the inflationary process. Asset price inflation now has a popular meaning quite different from the original found in Austrian business cycle theory. Two decades of widespread inflation targeting at around 2% per annum have encouraged us to ignore an old lesson. In a well-functioning capitalist economy under a sound money order, prices would fluctuate considerably upwards and downwards with a tendency to revert to the mean over the very long run. Finally the principles and hypotheses developed here are analysed in the laboratory of history, specifically for the greatest peacetime inflation in the U.S. (1963–80).

Application of local projections in the monetary policy in Brazil

ABSTRACTThis article examines the relationship between selected monetary aggregates and inflation and output in Brazil. Impulse responses under VAR and local projections were used to discover the leading or lagging role of the monetary aggregates. In addition, the information provided by the monetary aggregates as predictors of output and inflation was examined. This was assessed by examining their predictive power for subsequent observations on an in-sample basis. Overall, the results indicate that in order to control inflation rates, Brazilian authorities should focus on restricting money supply rather than increasing interest rates.

OIL PRICE SHOCKS, INFLATION, AND CHINESE MONETARY POLICY

This paper proposes a New Keynesian dynamic stochastic general equilibrium model of the Chinese economy incorporating the demand of oil to study the effects of oil price shocks on the business cycle. The model answers several questions, including how monetary policy should respond to the disturbances from such shocks, and whether monetary authorities should use core inflation or headline inflation including oil price inflation as the monetary policy rule. The contributions could be summarized as follows: First, the model reveals that the oil transmission mechanism is determined by the nominal inertia, income effect, and the portfolio allocation effect. Second, both noncore inflation monetary policy and core inflation monetary policy that are simultaneously pegged to oil prices fluctuations are inferior to the monetary policy purely pegged to core inflation. Our findings suggest that the monetary policy should focus on core inflation instead of headline inflation.

A New Approach to Exchange Rate Management in Small Open Financially Integrated Economies

We propose an integrated fiscal and monetary approach to economic stabilisation policy in small open financially integrated economies (SOFIE’s), using fiscal policy to achieve external balance at a targeted exchange rate. This approach overcomes the conundrum of the conventional Mundell-Fleming view, in today’s world of international financial integration, where capital controls do not insulate the small domestic economy, and where local authorities cannot be indifferent to the volatility of the exchange rate of local currency, and the potential harm to savings, investment, capital flight and domestic financial stability. In today’s world, the standard prescription of flexible exchange rates and independent monetary control targeting inflation presents challenges with which SOFIE’s have struggled, with little success. We describe the framework for an alternative which suits the circumstances of SOFIE’s.

Does Black Income Impact Monetary Aggregates, Inflation and Interest Rate In India? An ARDL Analysis with Granger Causality

Black income is presently the most important economic issue in India. This study demonstrates its macroeconomic impact on base and broad money, currency with the public, interest and inflation rate. Black income is co-integrated with them. The long-run causality between black income and these variables is unidirectional and stable. Black income Granger causes monetary aggregates and nominal interest rate in short run, but Granger causes inflation rate only in the long run. It has predictive content for monetary aggregates, nominal interest and inflation rate that could be used in monetary policy formulation.

Monetary Policy For Maintaining Low, Stable Inflation In Malaysia

The main thesis of this paper is that low, stable inflation, implying price stability, is important for promoting and sustaining economic growth in the midst of shocks of both domestic and foreign origin. The paper makes an overview of inflation, inflation volatility and monetary policy in Malaysia since the late 1950s and provides some evidence for a link between inflation volatility and economic growth. As part of determining the appropriate strategy of monetary policy for price stability, the paper investigates some monetary relations—namely the stability of the money-demand function and the linkages among money, output and prices—which form the foundation of a money-based monetary policy strategy under a flexible exchange rate system. The empirical results suggest that the narrow money-demand function in Malaysia remained stable over the period 1971–2012 and that cointegral-causal linkages existed in this country among money, output and prices throughout this period. These results give credence to deployment of monetary aggregates as an instrument of monetary policy, especially when the flexibility, effectiveness of a zero-bound interest rate remains doubtful as an instrument of monetary policy in a low-inflation environment. Nevertheless, Malaysia has apparently taken the stance that money does not matter insofar as inflation and its volatility are concerned. The money growth rate has remained volatile in this country and contributed to high and volatile inflation for most of the time over the study period. Some empirical results suggest that despite the impression of rule-based monetary strategy, Malaysia did not conduct a rule-based monetary policy—within either monetary targeting or inflation targeting—to keep inflation low and stable. Instead, the Bank Negara Malaysia (central bank of Malaysia) used discretionary monetary policy to achieve multiple objectives, including rapid economic growth. An outcome of this policy was elevated inflation volatility, which affected real interest and exchange rates and raised output volatility. The paper concludes that improved monetary policy transparency and elevated monetary policy credibility are expected to make a rule-based monetary policy more effective and keep inflation low and stable.

Monetary Inflation Mechanism: An Empirical View

We prefer to reconsider once again our larger paper published earlier, as we did it already for at least three of its revealed correlations: between nominal GDP and both monetary reserves and money supply (Andrei & Andrei 2014a, b) and between money multiplier and velocity (Andrei 2014), this time for something within our database (i.e. the Federal Reserves of Saint Lois State/FRED) that regards the inflation rate from nearby. Following our basic paper reference’s basics, inflation might be proper to both representative and fiat monies, but more deeply to the latter, although both monies again keep either the money supply and reserves as components. On the other hand, the same inflation is a so reach topic for theorists of all groups of thinking, e.g. there are some that identify it out of just money origins. This paper below tries to explain a monetary inflation mechanism in normal (out of crisis) environment.