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Inflation
Kinds of Inflation Terms modified by Inflation Selected AbstractsMARKET POWER, PRICE ADJUSTMENT, AND INFLATION,INTERNATIONAL ECONOMIC REVIEW, Issue 1 2010Allen Head We study a monetary search economy in which endogenous fluctuations in market power driven by changes in consumers' search intensity determine the extent of price adjustment to movements in productivity and the money growth rate. A calibrated version of the economy exhibits countercyclical fluctuations in markups and is consistent with the observed incomplete response of nominal prices to cost movements associated with productivity fluctuations and to changes in the money growth rate. Furthermore, a higher average rate of inflation results in a lower average markup and increases the sensitivity of prices to fluctuations in either productivity or money growth. [source] PRICE DISPERSION, INFLATION, AND WELFARE*INTERNATIONAL ECONOMIC REVIEW, Issue 2 2005Allen Head We examine the implications of inflation for both price dispersion and welfare in a monetary search economy. In our economy, if the degree of buyers' incomplete information about prices is fixed, both price dispersion and real prices are increasing in inflation. As the inflation rate approaches the Friedman rule, both price dispersion and welfare losses vanish. If households choose the number of prices to observe, then the optimal inflation rate may exceed the Friedman rule as inflation induces search and, up to a point, raises welfare by eroding market power. [source] GROWTH, COMMODITY PRICES, INFLATION AND THE DISTRIBUTION OF INCOMEMETROECONOMICA, Issue 1 2007Harry Bloch ABSTRACT A primary commodity price boom is underway. Given the role of internationally traded primary commodities as inputs into the productive process in the industrialized world, an important question arises: namely what effects will this price-boom exert upon wage and price inflation in industrialized countries? In order to address this question, we specify and estimate a system of equations in which the key dependent variables are world commodity prices, the domestic inflation rate for finished goods and the rate of domestic industrial wage inflation. This model is estimated against data for each of three major industrialized countries: Japan, the UK and the USA and the implications of the results thus obtained are explored. [source] IDENTIFYING THE SHOCKS DRIVING INFLATION IN CHINAPACIFIC ECONOMIC REVIEW, Issue 2 2010Pierre L. Siklos The time profile of inflation in China resembles the one experienced in major industrial countries. Given the uncertainty surrounding the sources of economic shocks, the present paper compares results from three sets of alternative identification conditions. Our principal finding is that inflation in China has been primarily driven by monetary factors. Although aggregate supply factors might have pushed inflation to cross the threshold leading to deflation, monetary policy is primarily responsible for Chinese inflationary outcomes. [source] DETERMINANTS OF FOREIGN INSTITUTIONAL INVESTMENT IN INDIA: THE ROLE OF RETURN, RISK, AND INFLATIONTHE DEVELOPING ECONOMIES, Issue 4 2004Kulwant RAI The present study examines the determinants of foreign institutional investments (FII) in India, which by January 2003 almost exceeded U.S. $12 billion. Given the huge volume of these flows and their impact on the other domestic financial markets, understanding the behavior of the flows becomes very important, especially at a time of liberalizing the capital account. By using monthly data, we found that FII inflow depends on stock market returns, inflation rates (both domestic and foreign), and ex-ante risk. In terms of magnitude, the impact of stock market returns and the ex-ante risk turned out to be the major determinants of FII inflow. Unlike some of the other investigations of this topic, our study has not found any causative link running from FII inflow to stock returns. Stabilizing stock market volatility and minimizing the ex-ante risk would help to attract more FII, an inflow of which has a positive impact on the real economy. [source] INFLATION AND THE PUBLIC DEFICIT WHEN THE UTILITY OF MONEY IS INSATIABLE,THE JAPANESE ECONOMIC REVIEW, Issue 2 2007ALEJANDRO RODRÍGUEZ-ARANA When the marginal utility of money is positive even at very high levels of the asset (Yoshiyasu Ono's, 1994, assumption), the relationship between inflation and the public deficit at full employment may result in a unique perverse equilibrium where higher deficits reduce inflation. If there are two equilibria, the low inflation equilibrium is one where the perverse effect between inflation and the public deficit prevails; while in the high inflation equilibrium higher public deficits increase inflation. These results contrast sharply with traditional results found in the literature. [source] DOES THE MAGNITUDE OF THE EFFECT OF INFLATION UNCERTAINTY ON OUTPUT GROWTH DEPEND ON THE LEVEL OF INFLATION?THE MANCHESTER SCHOOL, Issue 2 2010KUANG-LIANG CHANG A bivariate Markov regime switching model is employed to verify whether the relationship between inflation and inflation uncertainty, or the negative effects of inflation and inflation uncertainty on output growth, vary with the level of inflation. Inflation and inflation uncertainty are positively correlated in the high-inflation regime. In contrast, in the low-inflation regime, the direct effect of inflation on output growth is insignificant, but the indirect negative effect on growth via inflation uncertainty is highly significant. The negative influence in a high-inflation regime is 2.664 times greater than that in a low-inflation regime. [source] THE EVOLUTION OF INFLATION AND UNEMPLOYMENT: EXPLAINING THE ROARING NINETIESAUSTRALIAN ECONOMIC PAPERS, Issue 4 2008MARIKA KARANASSOU This paper analyses the relation between US inflation and unemployment from the perspective of ,frictional growth,' a phenomenon arising from the interplay between growth and frictions. In particular, we focus on the interaction between money growth and nominal frictions. In this context we show that monetary policy has not only persistent, but permanent real effects, giving rise to a long-run inflation-unemployment tradeoff. We evaluate this tradeoff empirically and assess the impact of productivity, money growth, budget deficit, and trade deficit on the US unemployment and inflation trajectories during the nineties. [source] INFLATION TARGETING AND THE STATIONARITY OF INFLATION: NEW RESULTS FROM AN ESTAR UNIT ROOT TESTBULLETIN OF ECONOMIC RESEARCH, Issue 4 2006Andros Gregoriou E31; C22 ABSTRACT In this paper, we examine the time series properties of inflation in seven countries that have adopted inflation targeting. Unlike previous studies, we utilize a non-linear mean reverting adjustment mechanism for inflation and we discover that, although deviations of inflation from the target can exhibit a region of non-stationary behaviour, overall they are stationary indicating successful targeting implementation. [source] Targeting Inflation with a Role for MoneyECONOMICA, Issue 288 2005Ulf Söderström This paper demonstrates how a target for money growth can be beneficial for an inflation-targeting central bank acting under discretion. Because the growth rate of money is closely related to the change in the interest rate and the growth of real output, delegating a money growth target to the central bank makes discretionary policy more inertial, leading to better social outcomes. This delegation scheme is also compared with other schemes suggested in the literature. The results indicate that stabilizing money growth around a target can be a sensible strategy for monetary policy, although other delegation schemes are often more efficient. [source] Relative Price Variability and Inflation in EuropeECONOMICA, Issue 265 2000David Fielding The relationship between inflation and the relative variability of prices has been the subject of careful investigation in the United States using data for product groups at the city level. Yet in Europe, where the relationship could have profound effects on the viability of monetary integration, no attempt has been made to study the relationship. This paper fills the gap by examining data disaggregated to the commodity level across 10 EU countries. Evidence is found for logistic smooth transitions in the relative price variability measures within countries and within product groups. When this deterministic component isremoved, the stochastic element is not persistent and does not always have the positive relationship with inflation commonly found in US city data. [source] Inflation, Inflation Variability, and CorruptionECONOMICS & POLITICS, Issue 1 2004Miguel Braun We present a model where agents can inflate the cost of goods needed to start an investment project and inflation variability increases monitoring costs. We show that inflation variability can lead to higher corruption and lower investment. We document a positive relationship between corruption and inflation variability in a sample of 75 countries. The effect is robust to the inclusion of country fixed effects, other controls, and 2SLS estimation. The results are economically significant: a one standard deviation increase in inflation variance from the median increases corruption by 12 percent of a standard deviation and reduces growth by 0.33 percentage points. Our paper highlights a new channel through which inflation reduces investment and growth, thus bridging the perception gap over the costs of inflation between economists and the public. We also find evidence that political competition reduces corruption and that corruption is pro-cyclical. [source] A Required Yield Theory of Stock Market Valuation and Treasury Yield DeterminationFINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 1 2009Christophe Faugère Stock market valuation and Treasury yield determination are consistent with the Fisher effect (1896) as generalized by Darby (1975) and Feldstein (1976). The U.S. stock market (S&P 500) is priced to yield ex-ante a real after-tax return directly related to real long-term GDP/capita growth (the required yield). Elements of our theory show that: (1) real after-tax Treasury and S&P 500 forward earnings yields are stationary processes around positive means; (2) the stock market is indeed priced as the present value of expected dividends with the proviso that investors are expecting fast mean reversion of the S&P 500 nominal growth opportunities to zero. Moreover, (3) the equity premium is mostly due to business cycle risk and is a direct function of below trend expected productivity, where productivity is measured by the growth in book value of S&P 500 equity per-share. Inflation and fear-based risk premia only have a secondary impact on the premium. The premium is always positive or zero with respect to long-term Treasuries. It may be negative for short-term Treasuries when short-term productivity outpaces medium and long run trends. Consequently: (4) Treasury yields are mostly determined in reference to the required yield and the business cycle risk premium; (5) the yield spread is largely explained by the differential of long-term book value per share growth vs. near term growth, with possible yield curve inversions. Finally, (6) the Fed model is partially validated since both the S&P 500 forward earnings yield and the ten-year Treasury yield are determined by a common factor: the required yield. [source] Inflation and string cosmologyFORTSCHRITTE DER PHYSIK/PROGRESS OF PHYSICS, Issue 5-7 2009A. Linde Abstract I give a brief review of inflationary theory and of its recent progress related to string cosmology. [source] Quantifying Components of Drug Expenditure Inflation: The British Columbia Seniors' Drug Benefit PlanHEALTH SERVICES RESEARCH, Issue 5 2002Steven G Morgan Objective. To quantify the relative and absolute importance of different factors contributing to increases in per capita prescription drug costs for a population of Canadian seniors. Data Sources/Study Setting. Data consist of every prescription claim from 1985 to 1999 for the British Columbia Pharmacare Plan A, a tax-financed public drug plan covering all community-dwelling British Columbians aged 65 and older. Study Design. Changes in per capita prescription drug expenditures are attributed to changes to four components of expenditure inflation: (1) the pattern of exposure to drugs across therapeutic categories; (2) the mix of drugs used within therapeutic categories; (3) the rate of generic drug product selection; and (4) the prices of unchanged products. Data Collection/Extraction Methods. Data were extracted from administrative claims files housed at the UBC Centre for Health Services and Policy Research. Principal Findings. Changes in drug prices, the pattern of exposure to drugs across therapeutic categories, and the mix of drugs used within therapeutic categories all caused spending per capita to increase. Incentives for generic substitution and therapeutic reference pricing policies temporarily slowed the cost-increasing influence of changes in product selection by encouraging the use of generic drug products and/or cost-effective brand-name products within therapeutic categories. Conclusions. The results suggest that drug plans (and patients) would benefit from more concerted efforts to evaluate the relative cost-effectiveness of competing products within therapeutic categories of drugs. [source] An Empirical Analysis of Inflation in OECD CountriesINTERNATIONAL FINANCE, Issue 1 2004Jane Ihrig During the 1990s, many OECD countries had declining rates of inflation while their unemployment rates were also falling, something that on the surface seemed at odds with the Phillips curve relationship between inflation and unemployment. For the USA, these seemingly contradictory developments have been reconciled in terms of two factors: (1) an acceleration in productivity and (2) structural changes in labour markets that lowered the natural unemployment rate (NAIRU). Here we ask whether comparable forces were at work in 19 other industrial countries. We find that productivity advancements were the main structural factor reducing inflation only in the USA. In other industrial countries, persistent labour-market slack was the main factor exerting downward pressure on inflation. This persistence stemmed, in part, from structural reforms that lowered the NAIRU while the unemployment rate was declining. Ireland, New Zealand and Norway were three countries where labour-market reforms helped to push inflation down dramatically. [source] The Lag from Monetary Policy Actions to Inflation: Friedman RevisitedINTERNATIONAL FINANCE, Issue 3 2001Nicoletta Batini This paper updates and extends Friedman's (1972) evidence on the lag between monetary policy actions and the response of inflation. Our evidence is based on UK and US data for the period 1953,2001 on money growth rates, inflation and interest rates, as well as annual data on money growth and inflation. We reaffirm Friedman's result that it takes over a year before monetary policy actions have their peak effect on inflation. This result has persisted despite numerous changes in monetary policy arrangements in both countries. Similarly, advances in information processing and in financial market sophistication do not appear to have substantially shortened the lag. The empirical evaluation of dynamic general equilibrium models needs to be extended to include an assessment of these models' ability to account for the monetary transmission lags found in the data. [source] Core Inflation and Monetary PolicyINTERNATIONAL FINANCE, Issue 3 2001Marianne Nessén What are the implications of targeting different measures of inflation? We extend a basic theoretical framework of optimal monetary policy under inflation targeting (Svensson 1997) to include several components of CPI inflation, and analyse the implications of using different measures of inflation as the target variable , headline CPI inflation, core inflation, and CPI excluding interest rates. Our main results are the following. First, barring the interest rate component, temporary shocks to inflation do not affect optimal monetary policy under any regime. Second, indirect (second-round) effects of disturbances on target variables need to be accounted for properly. Simply excluding seemingly temporary disturbances from the reaction function risks leading to inappropriate policy responses. Third, it may be optimal to respond to changes in one measure of inflation even if the target is defined in terms of another. Fourth, the presence of the direct interest rate component in the CPI tends to push optimal monetary policy in an expansionary direction. The net effect, considering also the traditional channel, however, depends on the nature of the initial disturbance. [source] Stabilizing Output and Inflation: Policy Conflicts and Co-operation under a Stability PactJCMS: JOURNAL OF COMMON MARKET STUDIES, Issue 5 2001Marco Buti The article analyses in a simple setting a game between an inflation-conservative central bank and a fiscal authority subject to an upper limit on the budget deficit. It is shown that complementarity or substitutability between the policies and the preference of each authority for the other authority's behaviour crucially depends on the type of shock hitting the economy. If the government attempts to stimulate output beyond its natural level, a ,deficit bias' emerges under non-co-operation; under co-operation, the equilibrium is characterized by both a ,deficit bias' and an ,inflation bias'. However, if the government only pursues cyclical stabilization these biases disappear and there are positive gains from co-ordinating the policy responses to shocks. [source] The Political Economy of Low InflationJOURNAL OF ECONOMIC SURVEYS, Issue 1 2001Jonathan Kirshner What are the politics of inflation? This question is usually raised solely when inflation rates are high. All levels of inflation, however, high and low, are the outcome of political conflicts. But no current approach to the study of inflation , sociological, neoclassical, modern political economy , adequately captures the full range of political issues at stake, and this leads to problems for both theory and policy. This paper critiques the existing perspectives on inflation and then focuses on three theoretical issues raised by those critiques: the economic costs of inflation; the concept of monetary neutrality from economic and political perspectives; and the importance of disaggregating economic growth statistics. Finally, the paper introduces and explores a contending approach to the analysis of the political economy of inflation: a ,micro-politics' perspective. This approach is the only one to address the politics of low inflation, which is of great significance for contemporary political economy. [source] Inflation and Growth: Stories Short and TallJOURNAL OF ECONOMIC SURVEYS, Issue 4 2000Jonathan Temple This paper reviews the stories that economists tell about the growth effects of inflation. Informal accounts are common, but there are few models that get to grips with the effects that are probably central. Partly as a result of this, and partly as a result of many econometric problems, much of the empirical evidence remains unconvincing. The paper assesses the various contributions, and suggests possible improvements. [source] The New Keynesian Phillips Curve: From Sticky Inflation to Sticky PricesJOURNAL OF MONEY, CREDIT AND BANKING, Issue 4 2008CHENGSI ZHANG New Keynesian Phillips Curve; inflation survey forecasts; sticky prices; structural breaks; monetary policy The New Keynesian Phillips Curve (NKPC) model of inflation dynamics based on forward-looking expectations is of great theoretical significance in monetary policy analysis. Empirical studies, however, often find that backward-looking inflation inertia dominates the dynamics of the short-run aggregate supply curve. This inconsistency is examined by investigating multiple structural changes in the NKPC for the U.S. between 1960 and 2005, employing both inflation expectations survey data and a rational expectations approximation. We find that forward-looking behavior plays a smaller role during the high and volatile inflation regime to 1981 than in the subsequent period of moderate inflation, providing empirical support for sticky price models over the last two decades. A break in the intercept of the NKPC is also identified around 2001 and this may be associated with U.S. monetary policy in that period. [source] Inflation and Welfare: A Search ApproachJOURNAL OF MONEY, CREDIT AND BANKING, Issue 1 2008BEN CRAIG inflation; search; money This paper uses a search model of monetary exchange to provide new insights for evaluating the welfare costs of inflation. We first show that the search model of money can rationalize the estimates of the welfare cost of inflation based on the "welfare triangle" methodology of Bailey (1956) and Lucas (2000) provided that buyers appropriate the social marginal benefit of their real balances. For other mechanisms, the measure given by the welfare triangle has to be scaled up by a factor that increases with sellers' market power. We introduce capital and endogenous participation decisions and study how the cost of inflation is affected. We provide calibrated examples in which a deviation from the Friedman rule is optimal. [source] Political Parties and Paper Money Inflation in Sweden During the 18th CenturyKYKLOS INTERNATIONAL REVIEW OF SOCIAL SCIENCES, Issue 2-3 2001Peter Bernholz First page of article [source] 3T MR of the prostate: Reducing susceptibility gradients by inflating the endorectal coil with a barium sulfate suspensionMAGNETIC RESONANCE IN MEDICINE, Issue 5 2007Yael Rosen Abstract Most prostate MRI/MRS examinations are performed with an endorectal coil inflated with air, leading to an air,tissue interface that induces magnetic susceptibility gradients within the gland. Inflation of the coil with a barium sulfate suspension is described and compared to inflation with air or liquid perfluorocarbon (PFC). The B0 field in the prostate gland was mapped for five healthy volunteers when the endorectal coil was inflated with each of the three agents. A marked decrease in the posterior-anterior (P-A) field gradient and a significant improvement in field homogeneity were evident in the presence of a barium suspension and PFC relative to air. MRS data acquired from the prostate gland in the presence of air, PFC, and a barium suspension in the endorectal coil showed similar trends, demonstrating improvement in line-widths and spectral resolution when the barium suspension or the PFC were inflating the endorectal coil. On this basis we conclude that a barium suspension provides an available, cheap, and safe alternative to PFC, and we suggest that inflating the endorectal coil with a barium suspension should be considered for prostate MR studies, especially at high field strengths (such as 3T). Magn Reson Med 57:898,904, 2007. © 2007 Wiley-Liss, Inc. [source] The Analysis of Seasonal Long Memory: The Case of Spanish Inflation,OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 6 2007Josu Arteche Abstract This paper describes semiparametric techniques recently proposed for the analysis of seasonal or cyclical long memory and applies them to a monthly Spanish inflation series. One of the conclusions is that this series has long memory not only at the origin but also at some but not all seasonal frequencies, suggesting that the fractional difference operator (1,L12)d should be avoided. Moreover, different persistent cycles are observed before and after the first oil crisis. Whereas the cycles seem stationary in the former period, we find evidence of a unit root after 1973, which implies that a shock has a permanent effect. Finally, it is shown how to compute the exact impulse responses and the coefficients in the autoregressive expansion of parametric seasonal long memory models. These two quantities are important to assess the impact of aleatory shocks such as those produced by a change of economic policy and for forecasting purposes, respectively. [source] Evaluating, Comparing and Combining Density Forecasts Using the KLIC with an Application to the Bank of England and NIESR ,Fan' Charts of Inflation,OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 2005James Mitchell Abstract This paper proposes and analyses the Kullback,Leibler information criterion (KLIC) as a unified statistical tool to evaluate, compare and combine density forecasts. Use of the KLIC is particularly attractive, as well as operationally convenient, given its equivalence with the widely used Berkowitz likelihood ratio test for the evaluation of individual density forecasts that exploits the probability integral transforms. Parallels with the comparison and combination of point forecasts are made. This and related Monte Carlo experiments help draw out properties of combined density forecasts. We illustrate the uses of the KLIC in an application to two widely used published density forecasts for UK inflation, namely the Bank of England and NIESR ,fan' charts. [source] The Asymmetric Impact of Inflation on Presidential ApprovalPOLITICS & POLICY, Issue 3 2002Sungdai Cho This article examines the impact of unexpected inflation on U.S. presidential approval levels for the period 1953,96. Unlike most previous considerations of economic expectations and presidential approval, we find clear evidence that unexpected inflation affects approval, but it does so in an asymmetric fashion. Higher than expected inflation has a negative impact on presidential approval, and VAR results indicate that the effects linger for more than two years. In contrast, lower than expected inflation has a negligible impact on presidential approval. [source] House Prices and InflationREAL ESTATE ECONOMICS, Issue 1 2002Ali Anari The present paper examines the long-run impact of inflation on homeowner equity by investigating the relationship between house prices and the prices of nonhousing goods and services, rather than return series and inflation rates as in previous empirical studies on the inflation hedging ability of real estate. There are two reasons for this methodological departure from prior practice: (1) while the total return on housing cannot be accurately measured, the total return on housing is fully reflected in housing prices, and (2) given that using returns or differencing a time series leads to a loss of long-run information contained in the series, valuable long-run information can be captured by using prices. Also, unlike previous related studies, we exclude housing costs from goods and services prices to avoid potential bias in estimating how inflation affects housing prices. Monthly data series are collected for existing and for new house prices as well as the consumer price index excluding housing costs for the period 1968,2000. Based on both autoregressive distributed lag (ARDL) models and recursive regressions, the empirical results yield estimated Fisher coefficients that are consistently greater than one over the sample period. Thus, we infer that house prices are a stable inflation hedge in the long run. [source] Inflation of Type I error rate in multiple regression when independent variables are measured with errorTHE CANADIAN JOURNAL OF STATISTICS, Issue 1 2009Jerry Brunner MSC 2000: Primary 62J99; secondary 62H15 Abstract When independent variables are measured with error, ordinary least squares regression can yield parameter estimates that are biased and inconsistent. This article documents an inflation of Type I error rate that can also occur. In addition to analytic results, a large-scale Monte Carlo study shows unacceptably high Type I error rates under circumstances that could easily be encountered in practice. A set of smaller-scale simulations indicate that the problem applies to various types of regression and various types of measurement error. The Canadian Journal of Statistics 37: 33-46; 2009 © 2009 Statistical Society of Canada Lorsque les variables indépendantes sont mesurées avec erreur, la régression des moindres carrés ordinaires peut conduire à une estimation biaisée et incohérente des paramètres. Cet article montre qu'un accroissement de l'erreur de type I peut aussi se produire. En plus de résultats analytiques, une étude par simulations Monte-Carlo de grande envergure montre que, dans certaines conditions que nous pouvons rencontrer facilement en pratique, l'erreur de type I peut être trop élevée. Une autre étude de Monte-Carlo de moindre envergure suggère que ce problème se rencontre aussi dans plusieurs types de régression et différents types d'erreur de mesure. La revue canadienne de statistique 37: 33-46; 2009 © 2009 Société statistique du Canada [source] | |||||||||||||||||||||||||||||||||||||||||||||||||