Real Inflation Research Articles

КЛЮЧЕВАЯ СТАВКА: ПРИЧИНЫ ПОВЫШЕНИЯ И ПОСЛЕДСТВИЯ ДЛЯ ЭКОНОМИКИ РОССИИ

The article, based on statistical data from Rosstat, the Bank of Russia, the Ministry of Finance, and other analytical resources, examines the motives that the mega-regulator is guided by when managing the key rate, and their consequences for the Russian economy. It is shown that the Central Bank is failing to cope with its main task - maintaining the stability of the national currency - the ruble. It is determined that this year the state adopted an extremely inflationary budget with colossal expenses. The inflation target of four percent is not achieved, and real inflation is significantly higher than the official one. The Central Bank is fighting inflation with the only method available to it - by raising the key rate, thereby in many ways only accelerating inflation. Problems in the economy in connection with the growth of the key rate are identified. In the context of accelerating inflation, ordinary citizens, small and medium businesses are in a worse position. The high key rate suppresses the development of the real sector of the economy. The hands of the state have essentially formed two economic contours. The first is privileged, which receives cheap money, the second is broader, living according to natural market conditions, formed thanks to the invisible hand of the market, which does not enjoy any support from the state. The mega-regulator created conditions when commercial banks, including state-owned ones, stopped working as banks, do not perform their main function - the transformation of savings into investments, without which scientific and technological progress is impossible, which is the main factor in the fight against inflation and at the same time economic growth. At the same time, we have sufficient growth potential. Reaching advanced development rates requires special refinancing tools. But for this, we need to create appropriate conditions. Without this, we will not achieve either financial or technological sovereignty and will not defeat inflation.

They Warned (Soviet Scientists Who Foresaw The Collapse of The Ussr)

The works of Soviet scientists who warned in the 60–70 years about the possibility of the collapse of the USSR are analyzed. In the book "Will the USSR live to 1984?", published in 1969, historian Andrei Amalrik identified the causes of the possible collapse of the USSR (the elimination of the most active and capable from the life and composition of the ruling class, the decrepitude of the regime, the degradation of morality and deideologization) and even named its approximate dates. In a note to the leaders of the government party dated March 19, 1970, physicists Sakharova and Turchin and historian Medvedev showed the slowdown in the sixties in the USSR of economic development and technological progress, the standard of living of the population, the growing lag in these areas from developed capitalist countries. They linked these phenomena with the lack of freedom of thought and creativity, political freedoms. The economist and historian Akhiezer analyzed the history of Russia and, based on the revealed cyclical development of Russia and the huge factual material about political and economic development, predicted perestroika and its collapse, accompanied by the collapse of the USSR. Khanin produced alternative estimates of the dynamics of the economic development of the USSR and its factors by a number of methods. A steady decline in the pace of economic development and resource efficiency has been revealed since the seventh five-year plan. On this basis, a significant reduction in the national income of the USSR was predicted from the mid-80s. B.N. Mikhalevsky, head of the Forecasting Department of the Central Research Institute of the USSR Academy of Sciences, in 1967 made a forecast of the development of the Soviet economy for the next 10–15 years. Based on an in-depth analysis of the structure of the Soviet economy and real inflation figures, it predicted a decline in industrial production and the standard of living of the population while maintaining the previous economic policy. It is shown that the authors of forecasts of the possible collapse of the USSR were either persecuted or their opinion was ignored. It is shown that ignoring warnings about the possible collapse of the USSR is explained by the authoritarian nature of the Soviet social system, the low intellectual level of the Soviet leadership of the 60s and 70s, and fears of losing power. The article analyzes the appearance of the authors of warnings about the collapse of the USSR.

TAX REVENUES OF BUDGETS UNITED TERRITORIAL COMMUNITIES: THEORETICAL ANALYSIS

Using general theoretical (synthesis, induction, deduction) and special (systematization, abstraction, component analysis) methods of scientific knowledge, the article examines the features of tax management in decentralization and analyzes tax revenues of the budgets of united territorial communities in Ukraine. The article describes the features of tax management of territorial communities in the context of decentralization and considers the changes that occur as a result. In the article the authors presented his own vision of the fiscal mechanism of territorial communities in the context of decentralization in terms of fiscal planning, fiscal control, fiscal support and fiscal regulation through the prism of financial norms and standards, financial limits and gaps, financial incentives and sanctions, regulatory support. The authors claims that the visualized indicators of budget execution of territorial communities in terms of revenues, expenditures and transfers are a new tool for budget analysis at the local level. The article considers the tools of tax management of territorial communities in the conditions of decentralization in the context of four stages, which are characterized by the author. Proposals and ways to reform the tax management of territorial communities in the context of decentralization are presented, including: the need to resume the indexation of regulatory monetary valuation of land and establish the indexation coefficient at the level of the real inflation index; continuation of non-application of benefits for land plots of railway transport. The article examines four classes of united territorial communities in the conditions of decentralization according to the structure and composition of tax payments.

Methods for Indexing the Income of the Population with an Increase in Consumer Prices

The article deals with the formation of money income of the population, changes in the formation of consumer goods and needs for them, including under the influence of pricing, the structural volumes of goods offered for sale with different consumer properties and values. The problem of dynamics and the level of growth in prices for consumer goods is considered from the standpoint of disclosing the relationship between the emerging incomes of the population, inflation, methods of indexation and compensatory regulation. The formation of the incomes of the population of Russia is characterized not only by an insufficiency in relation to existing needs, but also by many contradictions that restrain their correspondence with the goals of improving welfare. At the same time, the need to identify the changes in trends and patterns taking place in the economy and social practice becomes a condition for the possible improvement of the tasks being solved not only in increasing the income of the population, but also in regulating them in consumption and efficiency of use. In practice and in research results, the lack of a systematic nature of the tasks being solved is recorded (generalized) both in price regulation and in the indexation of income in guaranteed rates corresponding to the dynamics of real inflation indicators, its level positions, which are taken into account not only in the emerging wages in monetary form, but also in various benefits that are paid by the state. The solution of these problems requires further detailed scientific research of the processes actually occurring in economic practice with the use of methods for indexing the income of the population with an increase in consumer prices. The supply of consumer goods on the market, which does not have a profitable orientation towards their purchases, in our opinion, will always exacerbate the problem of choosing methods of price regulation, both on the part of the state and commodity producers.

The Structure–Agency Relation of Growth Imperative Hypotheses in a Credit Economy

ABSTRACT Growth dynamics are often explained by insatiable wants or anthropological constants, modelled as preferences and behavioural axioms. By contrast, structural perspectives postulate a growth imperative due to macroeconomic or monetary system-inherent properties. Reconciling both perspectives, we develop a relational structure–agency framework to evaluate growth imperative hypotheses. We analytically separate the credit structure (including balance-sheet mechanics and nominal uncertainty) from institutional structure, and describe decision norms for households, entrepreneurs, commercial banks, central bank, and the state. Our framework suggests that the interplay of credit principles, income-dependent saving and portfolio saving rationales prevent the interest rate from adjusting downwards and thereby cause mature credit economies to stagnate. Underemployment results in growth policies becoming the dominant norm – seeking, under budget constraints, to overcome declining growth rates. Our method helps identifying agency to resolve this imperative. Preventing real asset inflation to relieve monetary policy at the effective lower bound appears essential.

Domestic Investment, Foreign Direct Investment and Macroeconomic Stability in Nigeria

This study examines the relationship between the two major investment components (domestic investment and foreign direct investment) and macroeconomic stability in Nigeria. In order to capture the macroeconomic stability, some selected macroeconomic variables are presented, namely: real GDP growth rate (RGDPgr), trade openness (TOP), exchange rate (EXR), inflation rate (INFR), interest rate (INTR), private sector credit (PSC) which represent domestic variables and world oil price (WOP) which represent foreign variable. The study employs Johansen cointegration and Vector Autoregressive model as the estimation techniques. Findings from the study reveals that there is no long-run relationship between the selected macroeconomic variables and the two investment variables. The study also reveals that shocks and fluctuations from real GDP growth rate (RGDPgr), private sector credit (PSC), inflation rate (INFR), interest rate (INTR), exchange rate (EXR) and world oil price (WOP) strongly and significantly affect domestic investment in Nigeria; while the shocks and instabilities arising from real GDP growth rate (RGDPgr), inflation rate (INFR), interest rate (INTR), exchange rate (EXR), trade openness (TOP) and world oil price (WOP) majorly and significantly affect foreign direct investment in Nigeria during the period under review. The study therefore recommends that Nigerian government should provide stability measures in all the aforementioned macroeconomic indicators, as this will attract a higher level of FDI and this will create an enabling business environment for domestic investment to operate.

Business Confidence and Business Tourism in Japan

This study explored the asymmetric impact of business confidence index (BCI), real effective exchange rate, inflation, the value of trade index and Gross Domestic Product (GDP) on inbound business tourism in Japan using the methodology of asymmetric cointegration. The paper uses the nonlinear autoregressive distributed lag (NARDL) bounds test procedure to obtain the long-run cointegrating relationship. The estimated NARDL results show that in the long-run, the negative asymmetric impact of the BCI is stronger than the positive impact. Finally, the study confirms that for the long-run, asymmetric relation exists between tourism, BCI, real effective exchange rate, inflation, GDP and value of trade index.

A RESEARCH PAPER ON MONETARY POLICY AND INFRASTRUCTURAL GROWTH: FURTHER EVIDENCE FROM NIGERIA.

Extant economic literature has acknowledged monetary policy as a key factor influencing infrastructural growth through different channels, such as affordable housing and efficient transportation, among others. However, in recent times, the Nigeria’s experience suggests a conflicting position on the above supposition. It is against this backdrop that this study set out to investigate the nexus between monetary policy and infrastructural growth within the Nigerian context, time series data from 1981 to 2018, and utilizing the Fully Modified Least Squares (FMOLS) estimation technique. The results show that both real interest rate and inflation rate exerted negative and statistically significant impact on infrastructural growth, while federal government capital expenditure and net official development assistance impacted positively on the level of infrastructural growth in the period under assessment. In the light of the study’s findings, the study recommends that, the monetary authority should carefully review existing lending interest rate downward to a single digit that will be investment driven particularly in the face of current global economic uncertainties occasioned by the COVID-19 pandemic that has led to the collapse of many economies across the world.

Determinants of National Saving in Ethiopia

This research investigates the determinants of national saving in Ethiopia over the period 1984-2014. The main objective of the study is to identify the major factors that determine national saving in Ethiopia. The ordinary least square estimation method is used to arrive at the results of the study. The result of the long run and short run models revealed that Real Gross Domestic product, investment, consumption and inflation have shown similar relationship in both models. Real Gross Demotic product is the only factor which affects national saving significantly and positively. Other factors, which positively affect national saving, are not much significant. Example, investment, consumption and inflation are factors which affects national saving both positively and in significantly in the end. DOI: 10.7176/JESD/11-21-04 Publication date: November 30 th 2020

Dynamics of price level changes in the Visegrad group: comparative study

In Poland, as in many other countries, to measure inflation, expressed both by the CPI and HICP, the Laspeyres price index with weights from the base period is used. Thus calculated index does not take into account changes in the consumption structure which are caused by changes in prices in the analysed time interval (i.e.: a year). Therefore, in countries where the CPI is determined based on the Laspeyres index, there is a high probability of its bias due to substitution of goods, but not only. The value of the CPI or HICP should approximate the real inflation as accurately as possible, among others, because these indicators are used to index nominal values in the economy, which in turn is important in price decisions made by enterprises. Searching for an answer to the question about the possibility of effective reduction of the measurement bias in measuring inflation, the authors conducted an empirical study whose main aim was to assess diversity of the level of inflation in the Visegrad countries at different levels of aggregation, with particular emphasis on the scale of the bias in measuring inflation resulting from substitution of goods. The study concentrated on determining the size of differences arising from the change in the index formula used when estimating the level of inflation. The article consists of six parts in which sources and types of bias in inflation measurement are discussed, index formulas divided into weighted and unweighted ones are reviewed, statistics on inflation in the Visegrad countries are presented in a dynamic approach, and the results of empirical research are presented and discussed. For the purpose of the research part and the need to perform a comparative analysis, data on the HICP value from the Eurostat database from the years 2011–2018 were used. Therefore, it seems that both the choice of the calculation formula and the level of data aggregation in the analysis of inflation is significant in its estimates.

Cagan model of inflation with power-law memory effects

This paper considers a generalization of the model that has been proposed by Phillip D. Cagan to describe the dynamics of the actual inflation. In this generalization, the memory effects and memory fading are taken into account. In the standard Cagan model, the indicator of nervousness of economic agents, which characterizes the speed of revising the expectations, is represented as a constant parameter. In general, the speed of revising the expectations of inflation can depend on the history of changes in the difference between the real inflation rate and the rate expected by economic agents. We assume that the nervousness of economic agents can be caused not only by the current state of the process, but also by the history of its changes. The use of the memory function instead of the indicator of nervousness allows us to take into account the memory effects in the Cagan model. We consider the fractional dynamics of the inflation that takes into account memory with power-law fading. The fractional differential equation, which describes the proposed economic model with memory, and the expression of its exact solution are suggested.

MEASURING CO-MOVEMENT OF REAL INTEREST RATE AND INFLATION RATE: USING VEC APPROACH

It is important to know the future movement of economic variables for the planning and development of a country, Vector Error Correction (VEC) Model has been applied to disclose hidden long run as well as short-run patterns of the selected variables. ADF unit root testing procedure was applied to satisfy the conditions of applying the VEC Model. Using Johansen cointegration test long-run cointegration has been justified. But the VEC model reveals that long run significant causal relationship between the variables whereas there is no short-run causal relationship. The parameter was estimated using the OLS estimation technique. The validity of the model was confirmed by applying different quantitative approaches such as normality test, autocorrelation test, Portmanteau test, Unit root test, and various graphical approaches which suggested model selection and estimation were correct. The result of this present study may help Govt. agencies as well as planners to take an idea.

MEASURING CO-MOVEMENT OF REAL INTEREST RATE AND INFLATION RATE: USING VEC APPROACH

It is important to know the future movement of economic variables for the planning and development of a country, Vector Error Correction (VEC) Model has been applied to disclose hidden long run as well as short-run patterns of the selected variables. ADF unit root testing procedure was applied to satisfy the conditions of applying the VEC Model. Using Johansen cointegration test long-run cointegration has been justified. But the VEC model reveals that long run significant causal relationship between the variables whereas there is no short-run causal relationship. The parameter was estimated using the OLS estimation technique. The validity of the model was confirmed by applying different quantitative approaches such as normality test, autocorrelation test, Portmanteau test, Unit root test, and various graphical approaches which suggested model selection and estimation were correct. The result of this present study may help Govt. agencies as well as planners to take an idea.

Reexamination of Parallel Foreign Exchange and Real Estate Markets, Inflation and Monetary Policy Nexus in Zimbabwe 1998-2007

History that is ignored is very vengeful. The paper tests the claim by the central bank governor, who presided over hyperinflation in 2004-2008, that inflation was mainly driven by speculation and shadow printing of money in the financial system. Mutually reinforcing corporate incest manifesting in the real estate sector, banking sector, parallel foreign exchange market and the Zimbabwe stock exchange underpinned hyperinflation dynamics before and during his term of office. Speculative activities in these sectors drove money supply growth, parallel exchange rate premium and so, inflation. Existing studies have not tested his hypothesis and summarily have dismissed it arguing that hyperinflation was a doing of the central bank’s monetary indiscipline. Using ARDL models we establish long run relationships amongst the building materials price index, consumer price index, parallel exchange rate and broad money supply. We also find bidirectional causality between money supply and the consumer price index as well as between the building materials price index and money supply. We find causation running from building materials index to consumer price index; from parallel exchange rate to consumer price index; and from broad money to parallel exchange rate. Our findings, to a considerable extent, not only confirm the governor’s argument, but also confirm existing narratives of monetary indiscipline in explaining hyperinflation. Keywords: Reserve Bank of Zimbabwe, Gideon Gono, Inflation, Building Materials Index, CPI, Parallel Exchange rate, ARDL DOI: 10.7176/JESD/11-10-14 Publication date: May 31 st 2020

Foreign Exchange System in Nepal: A Theoretical Perspective

International economic relation and trade are occurred in different currency system. The currency of one country may not be tendered in another country. So, the natural person or organization requires buying the currency of target country. In fact it is the process of converting one currency into another currency, which makes globalization and international trade possible. Buying and selling of currency is made in spot market, forward market, futures market, swap market, and option market. Additionally, change in real price, structural change, speculation, inflation, interest rate, public debt, and status of terms of trade make effect in equilibrium position of exchange rate. Yet, demand and supply of the currency determine appreciation and depreciation of currency. Policy exchange rate is accepted as fixed rate, floating rate, crawling band, crawling peg, conventional fixed peg arrangement, pegged exchange rate within horizontal band peg, currency board, dollarization and no separate legal tender. Earlier mint par theory was universally accepted. However, in contemporary time, balance of payment theory and purchasing power parity theory are accepted as theories of foreign exchange. Market transaction is made through hedging, speculation, and arbitrage etc. Exchange control is made through unilateral method and bilateral method. Unilateral method includes bank rate policy, import and export policy, exchange equalization fund, exchange pegging, multiple exchange rates, rationing of foreign exchange, and blocked account whereas bilateral method includes clearing agreement, payment agreement, installment agreement, differed payment agreement, and compensation agreement etc as per necessity. Nepal has accepted fixed peg exchange rate regime with Indian currency and flexible exchange rate regime with rest of the currencies.

Финансовое развитие и успешность инфляционного таргетирования

In this paper we introduce the results of the research about the impact of financial development on the decrease in deviation of the real inflation rate from the central bank’s stated target inflation rate. Using methods of cluster analysis and panel procedures on a sample of the countries, which at the moment of writing the research officially stated to adhere to a policy of inflation targeting, we show that improving characteristics of financial development benefit the success of an inflation targeting regime (in terms of achieving its desired goal). It is also stated that for emerging economies the most vital channels of this mechanism are the increases in the efficiency and in the stability of financial markets and institutions.

A non-parametric statistic for testing conditional heteroscedasticity for unobserved component models

When prediction intervals are constructed using unobserved component models (UCM), problems can arise due to the possible existence of components that may or may not be conditionally heteroscedastic. Accurate coverage depends on correctly identifying the source of the heteroscedasticity. Different proposals for testing heteroscedasticity have been applied to UCM; however, in most cases, these procedures are unable to identify the heteroscedastic component correctly. The main issue is that test statistics are affected by the presence of serial correlation, causing the distribution of the statistic under conditional homoscedasticity to remain unknown. We propose a nonparametric statistic for testing heteroscedasticity based on the well-known Wilcoxon's rank statistic. We study the asymptotic validation of the statistic and examine bootstrap procedures for approximating its finite sample distribution. Simulation results show an improvement in the size of the homoscedasticity tests and a power that is clearly comparable with the best alternative in the literature. We also apply the test on real inflation data. Looking for the presence of a conditionally heteroscedastic effect on the error terms, we arrive at conclusions that almost all cases are different than those given by the alternative test statistics presented in the literature.

The relationship between financial development and income inequality in Turkey

Reducing income inequality and enhancing access to financial institutions play a vital role in achieving the Sustainable Development Goal 10, especially in developing countries. While there are studies on the nexus between financial development and economic growth, literature on financial development–income inequality nexus is limited and lack consensus. This paper examined the different dimensions of financial development on income inequality for the period 1990 to 2015 in Turkey. For this purpose, four financial development indices (i.e., overall financial development index, banking sector development index, stock market development index, and bond market development index) were constructed with principal component analysis (PCA). In addition to financial development indicators, the impact of real income, government expenditures, and inflation on income inequality were investigated using the ARDL bound testing procedure. The results showed that increasing real income and government expenditures reduce income inequality. We found a positive impact of inflation on income inequality in the short run, while the reverse holds in the long run. In the case of financial development, an inverted U-shaped relationship with income inequality for overall financial development and banking sector development was confirmed. A monotonically decreasing relationship between stock market development and income inequality was found in Turkey. The study highlights that the implementation of policies that eradicate discriminatory laws and facilitate equal access to financial privileges will promote equity and decline the outcomes of income inequality.

Macroeconomic effects of inflation targeting in advanced and emerging market economies

The article assessed the treatment effects of targeting inflation regime on the real output and consumer inflation persistence in both advanced and emerging market economies. An empirical analysis is based on data from 35 OECD and 40 emerging countries and covers inflation and non-inflation targets over the period 1990–2017. The results showed that inflation targeting (henceforth – IT) had no significant impact on the GDP per capita growth rate but slightly reduced the output volatility. This study founded out that full-fledged IT had the effect of slowing down consumer inflation and reducing its volatility. Moreover, in the OECD countries, the monetary framework had certain advantages during the Great Recession. The authors argued that in order to maintain price stability in emerging economies, a high level of central bank independence and accountability is required.

Multi-Asset Value Payoff: Is Recent Underperformance Cyclical?

Value is one of the most studied risk premia strategies across asset classes. Value factors, however, have struggled lately. To uncover the drivers of recent value factor underperformance, it is important to understand how value returns are affected by macroeconomic conditions. We build on the existing literature by directly measuring the macroeconomic characteristics of value factor portfolios, namely real economic growth and inflation exposures. By pairing methodologies commonly used to derive fundamental characteristics of equity portfolios, we are able to identify macro linkages that have not been previously made evident. Our holdings-based and factor-mimicking portfolio analyses provide insights into the behavior of value strategies across various asset classes, looking at both cyclical and idiosyncratic drivers.