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Article
Publication date: 27 July 2012

Andrew Phiri

The purpose of this paper is to evaluate threshold effects in the persistence of South African aggregate inflation data.

Abstract

Purpose

The purpose of this paper is to evaluate threshold effects in the persistence of South African aggregate inflation data.

Design/methodology/approach

The conventional approach for assessing the degree of persistence within an inflation process is via its integration properties. This study makes use of univariate threshold autoregressive (TAR) models and associated unit root testing procedures to investigate the integration properties of the inflation data. Out‐of‐sample forecasts are further performed for the TAR models and their linear counterparts.

Findings

The empirical results confirm threshold effects in the persistence of all employed aggregated measures of inflation, whereas such asymmetric effects are ambiguous for disaggregated inflation measures. None of the observed series is found to be stationary in their levels. The out‐of‐sample forecasts for all TAR models outperform their linear counterparts.

Practical implications

Given the scope of the study, the empirical analysis provides insight with concern to the performance of inflation subsequent to the adoption of the inflation target regime in South Africa. Of particular interest are the low persistence levels observed at inflation rates of below 4.7 and 4.4 percent for core and CPI inflation, respectively, as both these aggregated measures of inflation play an essential role in guiding monetary policy conduct within the economy. The overall findings imply that on an aggregate level, the South African Reserve Bank's (SARB's) current inflation target of 3‐6 percent encompasses a non‐stationary inflation range and thus proves to be restrictive on monetary policy conduct.

Originality/value

The paper fills in an important gap in the academic literature by evaluating asymmetric effects in the integration properties of inflation, at both aggregated and disaggregated levels, for the exclusive case of South Africa.

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Article
Publication date: 29 November 2018

Philip Kofi Adom, Mawunyo Prosper Agradi and Christopher Quaidoo

Following the reforms in monetary policy and shift in fiscal policies, it is logical to presume that these reforms may cause a significant structural change in the dynamic…

Abstract

Purpose

Following the reforms in monetary policy and shift in fiscal policies, it is logical to presume that these reforms may cause a significant structural change in the dynamic processes of inflation and hence affect the nature of inflation persistence. The purpose of this paper is to examine the persistence nature of the different inflation episodes while controlling for the effects of demand- and supply-side factors, which are modeled as regime-dependent.

Design/methodology/approach

This paper used the Markov-switching dynamic regression and annual time series data.

Findings

The results showed that high inflation regime is more persistent than low inflation regime, with a respective average duration of an escape of 3.5 and 2.57 years, which suggests that price stability achievements are less sustainable. In both regimes, demand- and supply-side factors play significant roles in driving inflation, but the effect of the latter dominates. Thus, on the argument of whether inflation in Ghana is structural or monetary, the results support the former. The roles of both structural and monetary factors have changed over time, but that of the former has been more significant and important in Ghana.

Originality/value

This study provides the first empirical attempt, in the case of Ghana, that examines the persistence nature of different inflation regimes, while modeling the effects of supply and demand factors as regime dependent. In the modeling sense, the authors also contribute by ruling out the assumption that the researcher knows the processes responsible for each observation at each point in time.

Details

International Journal of Emerging Markets, vol. 13 no. 6
Type: Research Article
ISSN: 1746-8809

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Book part
Publication date: 22 November 2012

Efrem Castelnuovo

The role of trend inflation shocks for the U.S. macroeconomic dynamics is investigated by estimating two DSGE models of the business cycle. Policymakers are assumed to be…

Abstract

The role of trend inflation shocks for the U.S. macroeconomic dynamics is investigated by estimating two DSGE models of the business cycle. Policymakers are assumed to be concerned with a time-varying inflation target, which is modeled as a persistent and stochastic process. The identification of trend inflation shocks (as opposed to a number of alternative innovations) is achieved by exploiting the measure of trend inflation recently proposed by Aruoba and Schorfheide (2011). Our main findings point to a substantial contribution of trend inflation shocks for the volatility of inflation and the policy rate. Such contribution is found to be time dependent and highest during the mid-1970s to mid-1980s.

Details

DSGE Models in Macroeconomics: Estimation, Evaluation, and New Developments
Type: Book
ISBN: 978-1-78190-305-6

Keywords

Abstract

Details

Panel Data Econometrics Theoretical Contributions and Empirical Applications
Type: Book
ISBN: 978-1-84950-836-0

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Article
Publication date: 1 January 1999

Debasish Chakraborty

This paper analyses the economic liberalization process in India that started in 1991. The focus of this paper is primarily on the sequencing of the opening up process and…

Abstract

This paper analyses the economic liberalization process in India that started in 1991. The focus of this paper is primarily on the sequencing of the opening up process and the importance of keeping the fiscal deficit under control. The paper argues that if a reforming economy is exposed to financial flows in the early stage of the reform process it will face either the risk of high inflation (under a fixed exchange rate) or the appreciation of the real exchange rate and the worsening trade balance (under a flexible exchange rate). The paper compares the reform process in India, Argentina and Chile, and concludes that the reform failed in Argentina and not in Chile, because Argentina opened up the real and financial sectors simultaneously and failed to control the fiscal deficit. Evidence from India suggests that India followed the right sequence with a substantial control over capital flows but had very high levels of fiscal deficit.

Details

International Journal of Social Economics, vol. 26 no. 1/2/3
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 13 April 2012

Sudhanshu Kumar, Naveen Srinivasan and Muthiah Ramachandran

In the past two decades, there has been a remarkable decline in inflation in both developed and developing countries, in sharp contrast to the period immediately preceding…

Abstract

Purpose

In the past two decades, there has been a remarkable decline in inflation in both developed and developing countries, in sharp contrast to the period immediately preceding it. Interestingly, the behaviour of inflation in India broadly exhibits such a pattern. For much of the 1970s and 1980s, India experienced recurrent bouts of high inflation together with sub‐par economic performance. Since the 1990s the inflation record has been far better. The purpose of this paper is to answer an important question about what ultimately brought on this improved economic outcome.

Design/methodology/approach

A time‐varying parameter model for inflation is proposed which nests all the plausible explanations. The time variation in parameters is modelled as driftless random walks, and is estimated using the median unbiased estimator. The median unbiased estimate helps in addressing the pile‐up problem, which arise if variances of the state specification are small. In such cases the maximum likelihood estimates are biased towards zero. Kalman Filter algorithm is used to obtain the time path of the parameters of the reduced form equation.

Findings

The estimated time paths of the reaction function coefficients suggest gradual changes in the rule coefficients. It has been found that while better monetary policy and structural change have played a non‐trivial role, good luck and exchange rate regime have played a major role in the moderation of inflation in the 1990s. This interpretation suggests that to prevent a resurgence of 1970s‐style inflation, the central bank should reinforce as much as possible its commitment to low inflation by institutional, operational, and rhetorical means. Otherwise, sooner or later, luck will dry out and high inflation could return.

Originality/value

A time‐varying parameter model for inflation in India is proposed which nests the various plausible explanations for moderate inflation in the recent decade. Most empirical and theoretical studies on inflation dynamics have concentrated on developed economies. This paper pays attention to the international dimension of the issue. The reduced form model is estimated using time‐varying parameter estimation technique.

Details

Indian Growth and Development Review, vol. 5 no. 1
Type: Research Article
ISSN: 1753-8254

Keywords

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Article
Publication date: 23 January 2009

Helder Ferreira de Mendonça

This article aims to analyze if the adoption of inflation targeting in Brazil contributed to an improvement in the conduction of monetary policy capable of increasing…

Abstract

Purpose

This article aims to analyze if the adoption of inflation targeting in Brazil contributed to an improvement in the conduction of monetary policy capable of increasing credibility and reducing inflation without an increase in the sacrifice rate.

Design/methodology/approach

Considering the Brazilian experience, this article estimates, through GMM and VAR methods, the offsetting effects of a monetary policy change on the output‐inflation and unemployment‐inflation trade‐offs.

Findings

The findings denote that the disinflationary process implemented in Brazil, after the adoption of inflation targeting, is not associated with the emergence of the above‐mentioned trade‐offs. Furthermore, the development of credibility in the conduction of monetary policy is an important element responsible for the achievement of this result.

Practical implications

Development of credibility is an important strategy for improving the conduction of the monetary policy.

Originality/value

The results of the paper give some new insights about the conduction of monetary policy for developing countries, which have adopted inflation targeting.

Details

Journal of Economic Studies, vol. 36 no. 1
Type: Research Article
ISSN: 0144-3585

Keywords

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Article
Publication date: 3 February 2021

Önder Özgür and Uğur Akkoç

The main purpose of this study is to forecast inflation rates in the case of the Turkish economy with shrinkage methods of machine learning algorithms.

Abstract

Purpose

The main purpose of this study is to forecast inflation rates in the case of the Turkish economy with shrinkage methods of machine learning algorithms.

Design/methodology/approach

This paper compares the predictive ability of a set of machine learning techniques (ridge, lasso, ada lasso and elastic net) and a group of benchmark specifications (autoregressive integrated moving average (ARIMA) and multivariate vector autoregression (VAR) models) on the extensive dataset.

Findings

Results suggest that shrinkage methods perform better for variable selection. It is also seen that lasso and elastic net algorithms outperform conventional econometric methods in the case of Turkish inflation. These algorithms choose the energy production variables, construction-sector measure, reel effective exchange rate and money market indicators as the most relevant variables for inflation forecasting.

Originality/value

Turkish economy that is a typical emerging country has experienced two digit and high volatile inflation regime starting with the year 2017. This study contributes to the literature by introducing the machine learning techniques to forecast inflation in the Turkish economy. The study also compares the relative performance of machine learning techniques and different conventional methods to predict inflation in the Turkish economy and provide the empirical methodology offering the best predictive performance among their counterparts.

Details

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

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Article
Publication date: 10 May 2019

Xiao-Shun Zhao, Li Yu, Xue Yang and Si-Yu Zhang

The purpose of this study was to develop a new folding method for modeling complicated folded fabric with surfaces of revolution.

Abstract

Purpose

The purpose of this study was to develop a new folding method for modeling complicated folded fabric with surfaces of revolution.

Design/methodology/approach

Irregular wrinkles and mesh distortions easily appear in the fold modeling of a complex curved surface. Aimed at this key technical problem, the segmentation mapping folding method (SMFM) is proposed in this paper. First, high-precision flattened planes were obtained by using segmentation mapping techniques. Second, the segmented planes were transformed into a folded and continuous geometric model by using matrix transformations. Finally, initial stress was used to modify the geometric folding errors, which ensured agreement with the inflated flexible fabric’s geometry and the original design.

Findings

Compared with the traditional folding method, SMFM has the advantages of good finite-element mesh quality, large radial compression rate, regular folds, etc. The surface area error and the volume error of the inflated single torus established by SMFM were only 1.2 per cent, showing that SMFM has high modeling accuracy. The numerical results of an inflatable re-entry vehicle are presented to demonstrate the reliability, feasibility and applicability of SMFM. Moreover, the stress modification reduced the problems of stress concentration and mesh distortions, improving the accuracy and stability of the numerical calculations.

Originality/value

In this paper, for the first time, a folding method for modeling complicated folded fabric is proposed. This methodology can be used to model the multidimensional compression and regular folds of complex surfaces of revolution that cannot be flattened and to improve the accuracy and stability of the numerical calculations.

Details

Engineering Computations, vol. 36 no. 4
Type: Research Article
ISSN: 0264-4401

Keywords

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Book part
Publication date: 13 May 2019

Rosaria Rita Canale and Rajmund Mirdala

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II…

Abstract

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.

This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.

Details

Fiscal and Monetary Policy in the Eurozone: Theoretical Concepts and Empirical Evidence
Type: Book
ISBN: 978-1-78743-793-7

Keywords

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