Resurgence Of Inflation Research Articles

Costs and benefits of the LIFO‐FIFO choice

AbstractThe choice of inventory cost flow assumption is a key financial reporting decision. The resurgence of inflation has renewed interest in this option. We derive algebraic models of the LIFO‐FIFO difference in cost of goods sold and the LIFO tax savings as a function of inflation, turnover, inventory increments, and tax rates. Managers and researchers can use these models to estimate the likely financial and tax impacts of LIFO adoption. Historic trends in public company LIFO usage since 1971 are consistent with the changing impacts estimated by our model. We infer an approximate cost level of using LIFO based on historic public company behavior. In the 1971–2022 period, LIFO adoptions were only common when the tax benefit in our model exceeded about 0.35% of COGS. Even when inflation rose in 2021 and 2022, the tax savings remained below this threshold, and there were far more LIFO abandonments than adoptions.

Indirect estimation of the monthly transport turnover indicator in Italy

The paper discusses the results of a selection of a set of monthly indicators to be used as predictors of the quarterly index of Italian service turnover. A mixed frequency approach based on sparse temporal disaggregation is used, which outperforms the classical methods of the Chow and Lin family, allowing both a high number of regressors by the LASSO method and stable estimates. The application refers to the turnover in transport, a sector strongly affected in 2020 by the dramatic movements due to the COVID-19 pandemic and the resurgence of inflation at the end of 2021. The monthly indicators are selected from 143 time series: 56 series of business surveys in transport about both the climate and frequency of the answers; 18 series from Assaeroporti about both passengers and cargo flights split by national and international routes; 69 series of monthly turnover in industry split by both sector of economic activity and reference market. The sample spans the months from January 2010 to December 2021 for both seasonally adjusted and unadjusted data. Several aspects of the estimation are considered: the stability of selected indicators over the quarters 2017–2021; their forecasting performance; the reliability of the estimates in terms of their monthly pattern.

Inflation surprises in a New Keynesian economy with a “true” consumption function

AbstractThe resurgence of inflation has been accompanied by a reversal of prospects of growth, with a prominent role assigned to the fall of households' purchasing power. Yet this real income effect of inflation surprises, independent of restrictive monetary policy, is not present in the standard New Keynesian models for monetary policy. The reason lies in the formulation of the consumption‐based “IS equation”. The paper shows how the income effect can be introduced by reformulating the consumption function, with the consequence that it exerts an autonomus stabilization effect on inflation. The main monetary policy implications are examined by means of simulations.

Flexible Inflation Targeting: Performance evaluation overlooks vital issues


 The paper analyses some vital aspects of India’s flexible inflation targeting (FIT) regime, whose first-term performance was evaluated by the RBI in 2021. The absence of negative shocks, collapse of international commodity prices at the time of its introduction, and decelerating growth are pointed out in this article as notable contributors to achieving inflation target than the change of regime as claimed by the RBI. The success in anchoring inflation expectations is contestable in the light of their rigid persistence, association with fuel prices and upward drift with resurgence of inflation in recent times, indicating that the task remains unaccomplished. The post-FIT rise in output volatility is highlighted, raising the question if increased inflation focus contributed to slower growth. Macroeconomic stability ascribed to credibility gained under FIT is similarly shown without basis as indicated by oil-price spikes and exchange rate pressures. Overall, FIT’s performance awaits further testing, especially over different economic cycles.

Excess Monetary Liquidity and Asset Prices (Exces de Liquidite Monetaire et Prix des Actifs) (French)

The recent rise of excess liquidity in the United States and in the euro zone did not result in a resurgence of inflation. Excess liquidity, rather than heading towards the market of consumer goods, could have moved towards the asset markets. In the data covering the period going from 1980 to 2004 and relative to the United States, the euro zone, the United Kingdom and Japan, there's no element pointing out an effect of excess liquidity on asset prices: there is no common trend in asset prices, vector models taking into account the excess liquidity developments do not explain the movements of asset prices, and the extension of the quantitative equation of money to transactions on assets does not stabilize the money velocity.

The European Employment Strategy and the EMU: You Must Invest to Save

There are no secrets behind Europe's high and persistent unemployment. It is not a question of competitiveness Europe is doing well on global markets. We cannot blame our main trading partners, or low-wage countries, for our shortcomings. And we should not blame fiscal policies, the convergence process. The reasons behind unemployment are internal to Europe. There are two distinct explanations.One has been our inability to tackle macroeconomic shocks in a coordinated way. As a consequence, downturns have been deeper and recoveries weaker than they need have been. The resultant low average rates of economic growth produced inadequate job creation relative to the growth of the potential workforce. The other explanation has been our inability to reform labour market policies and social protection systems to meet the labour market needs of today. Europe's policies were originally created for labour markets with one male breadwinner, working in manufacturing or construction. Labour market and social policies f...

Executive Summary

Our assessment of the outlook for the UK economy over the next two years has become slightly more cautious in the wake of the additional fiscal tightening announced in the November Budget. Although we had anticipated tax and public spending measures of the right magnitude in 1994/95, the Budget was more severe in 1995/96 and beyond than we had expected. We have scaled back our estimates of growth for 1995 and 1996 accordingly. On a more positive note, we expect the outlook for inflation to be better than we indicated last October. The mid‐1990s are' likely to see a period of sustained low inflation which has not been seen since the 1960s. The government's target measure ‐ RPI excluding mortgage interest ‐ is not expected to test the 4 per cent target ceiling though it is stuck in the 3‐3.5 per cent range for most of the forecast period. Despite expecting slower growth, we are now more optimistic about unemployment, which we expect to fall below 2.4 million in 1997. We now believe that increased labour market flexibility should allow the economy to grow on a lower real wage and productivity growth path, at least while unemployment remains so high. However, whether this improved performance would allow the UK to sustain an unemployment of below 2 million without a serious resurgence of inflation is still open to question.

Brazil's failure: What future for debtors’ cartels?

(1987). Brazil's failure: What future for debtors’ cartels? Third World Quarterly: Vol. 9, No. 4, pp. 1157-1166.

More Efficient Economic Policies of Disinflation: The Case of Greece

The high inflation rate and the increase in the unemployment rate coupled with very low growth rates, occured as a result of the second oil crisis, was confronted the policy makers of the new administration with a dilemma. They responded with a compromise of different sorts of policies aiming at achieving a gradual reduction of the inflation and unemployment rates so that they are reduced down to equilibrium over a long enough period of time.However, the monetary and fiscal policies adopted are not considered as a single macroeconomic instrument. The growth of real output is pursued with an expansionary public and fiscal policy, while inflation is confronted with restrained monetary policy against the private sector of the economy. Moreover, the way prices and incomes policy is adopted postpones recovering of output and profits, thus creating serious fears for a further increase of unemployment and a resurgence of inflation.

Economic Policy Challenges for Sustained Growth*

This paper presents the views of the Prime Minister (as at March 1985) on some of the major economic challenges facing Australia and some of the policy soptions his government proposes to pursue in order to maintain the economic recovery without a resurgence of inflation and to improve Australia's long‐term growth performance.