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Inflation Variability (inflation + variability)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Inflation, Inflation Variability, and Corruption

ECONOMICS & POLITICS, Issue 1 2004
Miguel 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]

Does Inflation Targeting Affect the Trade,off Between Output Gap and Inflation Variability?

THE MANCHESTER SCHOOL, Issue 4 2002
Philip Arestis
We utilize a stochastic volatility model to analyse the possible effects of inflation targeting on the trade,off between output gap variability and inflation variability. We find that the adoption of inflation targets (in New Zealand, Australia, Canada, the UK, Sweden and Finland) might result in a more favourable monetary policy trade,off (except in Australia and Finland). This conclusion is reached by comparing, first, the economic performance of targeting countries in the 1980s and the 1990s; and second, the economic performance in the 1990s of targeting and non,targeting countries (the USA, Japan, Switzerland, Germany, France and the Netherlands). We focus on two possible explanations for the performance of the inflation,targeting regime: the relatively high degree of monetary policy transparency, and the presence of a flexible institutional framework. [source]

Inflation, Inflation Variability, and Corruption

ECONOMICS & POLITICS, Issue 1 2004
Miguel 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]

Monetary policy and exchange rate pass-through,

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2004
Joseph E. Gagnon
Abstract The pass-through of exchange rate changes into domestic inflation appears to have declined in many countries since the 1980s. We develop a theoretical model that attributes the change in the rate of pass-through to increased emphasis on inflation stabilization by many central banks. This hypothesis is tested on 20 industrial countries between 1971 and 2003. We find widespread evidence of a robust and statistically significant link between estimated rates of pass-through and inflation variability. We also find evidence that observed monetary policy behaviour may be a factor in the declining rate of pass-through. Published in 2004 by John Wiley & Sons, Ltd. [source]

The Political Economy of Inflation, Labour Market Distortions and Central Bank Independence*

THE ECONOMIC JOURNAL, Issue 484 2003
Berthold Herrendorf
Using the citizen-candidate model we study the government's choice of institutions for the labour market and the central bank and derive the implications for inflation and employment. We derive conditions for the existence of equilibria in which the labour market is distorted and the central bank is dependent or independent under a range of conditions affecting central bank dependence, the post-election cycle in inflation and employment and inflation bias. Our results imply that average inflation and inflation variability are lower under an independent central bank whereas employment variability can be lower or higher, consistent with evidence for OECD countries. [source]

Does Inflation Targeting Affect the Trade,off Between Output Gap and Inflation Variability?

THE MANCHESTER SCHOOL, Issue 4 2002
Philip Arestis
We utilize a stochastic volatility model to analyse the possible effects of inflation targeting on the trade,off between output gap variability and inflation variability. We find that the adoption of inflation targets (in New Zealand, Australia, Canada, the UK, Sweden and Finland) might result in a more favourable monetary policy trade,off (except in Australia and Finland). This conclusion is reached by comparing, first, the economic performance of targeting countries in the 1980s and the 1990s; and second, the economic performance in the 1990s of targeting and non,targeting countries (the USA, Japan, Switzerland, Germany, France and the Netherlands). We focus on two possible explanations for the performance of the inflation,targeting regime: the relatively high degree of monetary policy transparency, and the presence of a flexible institutional framework. [source]