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The authors model heterogeneity of inflation expectations across Indian households using the Inflation Expectations Survey of Households data set. Using Carroll-type epidemiological models and pooled cross sectional analyses, the authors find that women, homemakers, older people and Tier 2 and 3 city dwellers tend to have higher inflation expectations compared to their counterparts. In the epidemiological model-based analysis, these very cohorts display higher speed of adjustment to news. Overall higher relative adjustment speeds point to the significance of central bank communications.

The aim of this chapter is to show the limits of the European policy model and to support the existence, through straightforward empirical analysis, of an inverse relationship both in the short run and in the long run between trust in institutions and unemployment. The empirical methodology relies on dynamic panel data techniques allowing measuring in a single equation both the long-run relationship and the short-run speed of adjustment among variables. This connection appears to be valid both in the Eurozone considered as a whole and in particular in peripheral countries, where the macroeconomic dynamics have been, under this respect, much more divergent from the average. This outcome allows proofing that to consolidate the European process of integration in the long run, institutions should have as main objective not only inflation but especially unemployment.

Building upon the framework of the tradeoff model of capital structure and motivated by the equity market timing theory, we examine whether equity misvaluation is a source of adjustment “costs” that will affect a firm’s leverage adjustment speed toward target. We also investigate whether the quality of a firm’s long-term growth options will influence the decisions of managers to exploit the mispriced equity to converge to the optimum. Using a sample of listed Taiwanese firms during 1992–2014 and employing the market-to-book decomposition as developed by Rhodes-Kropf, Robinson, and Viswanathan (2005), we find that overleveraged and overvalued firms demonstrate faster adjustment speed than overleveraged but undervalued firms. Furthermore, controlling for the misvaluation status, high-growth firms converge to target faster than their low-growth counterparts. The effect of growth options on the relation between equity mispricing and adjustment speed does not mirror the effect of financing deficits. With the detailed financial information of the local companies across a rather long time series, this study provides incremental inputs to the literature of capital structure from the determinants of target leverage, the estimation of leverage adjustment speeds, to the identification of the sources of adjustment costs in an emerging market where institutional environment is strikingly different from the US.

I contribute to the ongoing policy discourse on the challenges of monetary policy transmission in environments with consolidated financial sectors and high credit rates. I empirically investigate the lending rate pass-through in Azerbaijan – a small resource-rich economy in transition – by taking advantage of a unique set of high-frequency bank-level data. My bottom-line policy message is the following. First, lending rates are considerably irresponsive to monetary policy shocks, and the interest rate channel ought to be somehow improved. Second, macroeconomic fundamentals and the concentrated bank sector are surprisingly not among the reasons behind the policy-market disconnect. Third, domestic commercial banks are able to exert substantial monopolistic pricing capacities and keep credit rates high, particularly when the central bank loosens its policy stance. Fourth, the underlying cause of both monetary policy inefficacy and high interest rate stickiness appears to be structural excess liquidity. In fact, empirical results show that pass-through is substantially higher for less liquid banks. Extraction of excess liquidity from the system should mitigate the banks’ monopolistic pricing powers, improve the efficiency of the interest rate channel, and ultimately bring the credit rates down.