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Article
Publication date: 5 February 2024

Muhammad Sajid, Amanat Ali, Sareer Ahmad, Nikhil Chandra Shil and Izaz Arshad

This study empirically examines the impact of some domestic as well as global factors such as trade openness (TO), money supply (MS), exchange rate, global oil prices (GOPs) and…

Abstract

Purpose

This study empirically examines the impact of some domestic as well as global factors such as trade openness (TO), money supply (MS), exchange rate, global oil prices (GOPs) and interest rate (IR) on inflation.

Design/methodology/approach

This study deploys a quantitative method considering 30 years of data (1991–2020) from four South Asian countries, namely, Sri Lanka, Pakistan, Bangladesh and India. To determine the potential impact of different factors on inflation, this study applies the panel analysis of the system generalized method of moments (SGMM).

Findings

This study empirically finds that TO, MS, exchange rate and GOPs have a positive impact on inflation, while IR and the structural adjustment program (SAP) have a negative impact on inflation. Out of the various determinants considered in this study, TO, exchange rate and the SAP are insignificant, while the rest of the variables are significant and consistent with previous studies.

Practical implications

This study informs policymakers about maintaining price stability and fostering economic growth in South Asian nations. It breaks new ground as the first empirical examination of the International Monetary Fund (IMF)’s SAP impact on inflation in the region.

Originality/value

This study tries to find out whether the SAP of the IMF is responsible for inflation in South Asian countries. It gives renewed attention to the causality of inflation from the perspective of countries receiving loans from donors, especially the IMF.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 31 October 2008

James E. Payne

The purpose of this paper is to extend the literature on the relationship between inflation and inflation uncertainty by examining three Caribbean countries: the Bahamas…

4188

Abstract

Purpose

The purpose of this paper is to extend the literature on the relationship between inflation and inflation uncertainty by examining three Caribbean countries: the Bahamas, Barbados, and Jamaica.

Design/methodology/approach

ARMA‐GARCH models are used to estimate inflation uncertainty along with Granger‐causality tests to infer the relationship between inflation and inflation uncertainty.

Findings

The results reveal that both the Bahamas and Jamaica exhibit a high degree of volatility persistence in response to inflationary shocks, while Barbados has a much lower persistence measure. Granger‐causality tests indicate that an increase in inflation has been a positive impact on inflation uncertainty for each country. However, an increase in inflation uncertainty yields a decrease in inflation in the case of Jamaica. In summary, the results for the Bahamas and Barbados support the Friedman‐Ball hypothesis, whereas the results for Jamaica support Holland's stabilization‐motive hypothesis.

Research limitations/implications

Future research on inflation and inflation uncertainty can be extended to incorporate possible regime shifts associated with fiscal and monetary policy.

Originality/value

The study fills a void in the literature with respect to the inflationinflation uncertainty nexus for Caribbean countries. The results of the paper may be useful to policymakers in the formulation of fiscal and monetary policy.

Details

Journal of Economic Studies, vol. 35 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 1 April 2004

Osamah M. Al‐Khazali

This paper investigates the generalized Fisher hypothesis for nine equity markets in the Asian countries. It states that the real rates of return on common stocks and the expected…

2280

Abstract

This paper investigates the generalized Fisher hypothesis for nine equity markets in the Asian countries. It states that the real rates of return on common stocks and the expected inflation rate are independent and that nominal stock returns vary in a one‐to‐one correspondence with the expected inflation rate. The regression results indicate that stock returns in general are negatively correlated to both expected and unexpected inflation, and that common stocks provide a poor hedge against inflation. However, the results of the VAR model indicate the lack of a unidirectional causality between stock returns and inflation. It also fails to find a consistent negative response neither of inflation to shocks in stock returns nor of stock returns to shocks in inflation in all countries. It appears that the generalized Fisher hypothesis in the Asian markets is as puzzling as in the developed markets.

Details

Journal of Economic Studies, vol. 31 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 1 August 1999

Osamah Al‐Khazali

Vector‐autoregression (VAR), integration, and cointegration models are used to investigate the causal relations, dynamic interaction, and a common trend between interest rates and…

4071

Abstract

Vector‐autoregression (VAR), integration, and cointegration models are used to investigate the causal relations, dynamic interaction, and a common trend between interest rates and inflation in nine countries in the Pacific‐Basin. This paper finds that for all countries, short‐ and long‐term interest rates and the spread between the long‐term interest rates and inflation are non‐stationary I (1) processes. The nominal interest rates and inflation are not co‐integrated. In addition to this study’s inability to find a unidirectional causality between inflation and interest rates, when the VAR model is used, it also fails to find a consistent positive response either of inflation to shocks in interest rates or of interest rates to shocks in inflation in most of the countries studied. The VAR model results are consistent with the cointegration tests’ results, that is, nominal interest rates are poor predictors for future inflation in the Pacific‐Basin countries.

Details

Management Decision, vol. 37 no. 6
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 20 July 2015

Raghbendra Jha and Varsha S. Kulkarni

The purpose of this paper is to amend the New Keynesian Phillips Curve (NKPC) model to include inflation volatility. It provides results on the determinants of inflation

1019

Abstract

Purpose

The purpose of this paper is to amend the New Keynesian Phillips Curve (NKPC) model to include inflation volatility. It provides results on the determinants of inflation volatility and expected inflation volatility for ordinary least squares and autoregressive distributed lags (1,1) models and for change in inflation volatility and change in expected inflation volatility using error correction mechanism (ECM) models. Output gap affects change in expected inflation volatility alone (in the ECM model) and not in the other models. Major determinants of inflation volatility and expected inflation volatility are identified. To the best of the authors knowledge this is the first paper to augment the NKPC to include inflation volatility.

Design/methodology/approach

Recent analysis has indicated the importance of inflation volatility for the monetary transmission mechanism in India (Kapur and Behera, 2012). In the analysis of such monetary policy mechanisms the NKPC has proved to be a useful tool. Thus Patra and Ray (2010) for India and Brissimis and Magginas (2008) for the USA find considerable support for the standard NKPC. The purpose of this paper is to synthesize and integrate these two models by extending the standard NKPC framework to include inflation volatility and test its significance for the case of India.

Findings

In the case of inflation volatility output gap, lagged output gap and lagged inflation volatility are all insignificant. The level of inflation has a negative significant impact whereas the level of expected inflation has a positive and significant impact. In the case of expected inflation volatility lagged output gap has a negative and significant impact, the price level has a positive and significant impact whereas expected price has a negative and weakly significant impact. ECM reveals change in inflation variability falls significantly with lagged inflation volatility and lagged inflation and less significantly with change in expected inflation. It rises with lagged expected inflation although the coefficient is only weakly significant. Lagged output gap and change in output gap are insignificant.

Originality/value

This paper makes two original contributions. First, it extends the New Keynesian framework to include inflation volatility. Second, it estimates this model for India. To the best of the authors knowledge this is the first paper to make these contributions.

Details

International Journal of Emerging Markets, vol. 10 no. 3
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 1 September 1994

Martin Hoesli

Tests the inflation‐hedging ability of Swiss real estate over the1943‐1991 period and, for comparison purposes, that of stocks. Resultsshow that in the long run real estate seems…

3040

Abstract

Tests the inflation‐hedging ability of Swiss real estate over the 1943‐1991 period and, for comparison purposes, that of stocks. Results show that in the long run real estate seems to provide a better hedge against inflation than common stocks. When the inflation rate is broken down into its expected and unexpected components, all coefficients are negative for stocks, whereas some coefficients are positive for real estate. This is particularly true for unexpected inflation. These results are interesting in that the proxy used for real estate (i.e. data pertaining to real estate mutual funds) should be a much better indicator of changes in the underlying real estate than indices which have been used so far. Moreover, the data exists for a very long time period, which makes it possible to test the long‐term ability of real estate to hedge against changes in the purchasing power.

Details

Journal of Property Valuation and Investment, vol. 12 no. 3
Type: Research Article
ISSN: 0960-2712

Keywords

Article
Publication date: 18 May 2010

Hamid Baghestani and Bassam AbuAl‐Foul

This study aims to both test the asymmetric information hypothesis and explore the factors influencing the one‐ through four‐quarter‐ahead Federal Reserve inflation forecasts for…

1939

Abstract

Purpose

This study aims to both test the asymmetric information hypothesis and explore the factors influencing the one‐ through four‐quarter‐ahead Federal Reserve inflation forecasts for 1983‐2002.

Design/methodology/approach

Encompassing tests are used to examine the asymmetric information hypothesis. In modeling the Federal Reserve inflation forecasts, the authors are mindful of alternative theories of inflation which emphasize such determinants as cost‐push, demand‐pull and inertial factors.

Findings

First, the Federal Reserve inflation forecasts embody useful predictive information beyond that contained in the private forecasts. Second, with the private forecasts controlled for, the near‐term Federal Reserve inflation forecasts make use of qualitative information, and the longer‐term forecasts are influenced by the forecasts of growth in both unit labor costs and aggregate demand as well as the preceding‐quarter inflation forecasts and monetary policy shifts.

Research limitations/implications

The Federal Reserve forecasts are released to the public with a five‐year lag and are currently available up to the fourth quarter of 2002. This limits the use of the most up‐to‐date forecasts desirable for this study.

Originality/value

The factors influencing the Federal Reserve inflation forecasts are basically those emphasized publicly by monetary authorities. This finding points to the Fed's transparency and should thus help enhance its credibility with the public. Also, our results (which shed light on the predictive information in the Federal Reserve inflation forecasts not included in the private forecasts) are of value, since they can help the Fed better predict how inflation will respond to policy actions, and they can help the public form more informative inflationary expectations.

Details

Journal of Economic Studies, vol. 37 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 1 September 2006

Ernest Wood

Property returns are normally measured against the target rate for similar investments with comparable risks and liquidity. However, this analysis is normally undertaken in…

4508

Abstract

Purpose

Property returns are normally measured against the target rate for similar investments with comparable risks and liquidity. However, this analysis is normally undertaken in nominal terms and thus the risk of inflation, as it affects different investments, is not fully quantified. This paper seeks to analyse the effect of inflation on property investments.

Design/methodology/approach

This article examines the impact of inflation on gilt returns and relates this to property risk.

Findings

Investors may take a more pessimistic view of future inflation as an investment risk than the current official indices would indicate. In this context it may be that retail price index (RPI) and index adjusted for mortgage payments (RPIX) are not reliable indicators of inflation risk. It has been suggested that the difference between the two species of gilts as “a calculation of inflation expectations should be regarded with suspicion because of the volume of index linked bonds is so small that individual trades can move the market”.

Practical implications

Economists and financial advisers and commentators have long recognised that inflation, in the sense of the tendency of the value of a currency to decline in purchasing power, distorts the picture of the worth, not only of individual assets but also of the whole economy. In this respect investment advisers often, in presenting their arguments, use yields that are net of the rate of experienced inflation taken from the performance of the RPI or the RPIX. Unless there is an understanding of the risk of inflation on property investments, such net rates may be misleading.

Originality/value

This study adds to the literature exploring the effect of inflation on property returns.

Details

Journal of Property Investment & Finance, vol. 24 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 January 1982

MICHAEL HOLLIHAN

The literature concerning the subject of inflation and relative prices has been growing so fast in the last few years that a review in chronological order allows for a greater…

Abstract

The literature concerning the subject of inflation and relative prices has been growing so fast in the last few years that a review in chronological order allows for a greater understanding of the subject. This approach is taken here.

Details

Studies in Economics and Finance, vol. 6 no. 1
Type: Research Article
ISSN: 1086-7376

Article
Publication date: 4 March 2019

Khandokar Istiak and Md Rafayet Alam

The purpose of this paper is to investigate the possible asymmetric response of inflation expectations to oil price and policy uncertainty shocks.

1193

Abstract

Purpose

The purpose of this paper is to investigate the possible asymmetric response of inflation expectations to oil price and policy uncertainty shocks.

Design/methodology/approach

The authors used the test of asymmetric impulse responses proposed by Kilian and Vigfusson (2011) to explore the issue of asymmetry.

Findings

Unlike other studies that assume symmetric effects, this study finds asymmetric effects of oil price and policy uncertainty on inflation expectations for positive and negative shocks and for pre- and post-financial-crisis periods. In particular other things being same, a same magnitude oil price shock has greater effect on inflation expectations in post-crisis period than in pre-crisis period. Moreover, in post-crisis period a positive increasing oil price shock has greater effect on inflation expectations than a negative decreasing oil price shock.

Practical implications

The paper concludes that FED’s greater focus on output stabilization since financial crisis has made inflation expectations less anchored and a sudden surge in oil price may quickly trigger inflation through inflation expectations.

Originality/value

Exploring the issue of the possible asymmetric effects of oil price and economic policy uncertainty on inflation expectations is a relatively new topic (as other studies only assumed symmetry and did not investigate the possible asymmetry in this regard).

Details

Journal of Economic Studies, vol. 46 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

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