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In a recent contribution to this Journal, Imanuel Wexler and Stephen M. Miller (1975) analyse the appropriate policy measures by which a country can correct an external…
In a recent contribution to this Journal, Imanuel Wexler and Stephen M. Miller (1975) analyse the appropriate policy measures by which a country can correct an external imbalance while adhering to a predetermined mix of domestic inflation and unemployment. Wexler and Miller concentrate their attention on a case in which the domestic inflation/unemployment target coincides with external defect. They assume that the authorities are willing to tolerate a given inflation/unemployment mix but wish to erradicate the external imbalance. This problem is analysed within the context of two assumptions about the domestic rate of inflation relative to the foreign rate.
The purpose of this paper is to report on a sequential three-stage analysis of inflation persistence using monthly data from 11 inflation targeting (IT) countries and, for…
The purpose of this paper is to report on a sequential three-stage analysis of inflation persistence using monthly data from 11 inflation targeting (IT) countries and, for comparison, the USA, a non-IT country with a history of credible monetary policy.
First, the authors estimate inflation persistence in a rolling-window fractional-integration setting using the semiparametric estimator suggested by Phillips (2007). Second, the authors use tests for unknown structural breaks as a means to identify effects of the regime switch and the global financial crisis on inflation persistence. The authors use the sequences of estimated persistence measures from the first stage as dependent variables in the Bai and Perron (2003) structural break tests. Finally, the authors reapply the Phillips (2007) estimator to the subsamples defined by the breaks.
Four countries (Canada, Iceland, Mexico, and South Korea) experience a structural break in inflation persistence that coincide with the implementation of the IT regime, and three IT countries (Sweden, Switzerland, and the UK), as well as the USA experience a structural break in inflation persistence that coincides with the global financial crisis.
The authors find that in most cases the estimates of inflation persistence switch from mean-reversion nonstationarity to mean-reversion stationarity.
Monetary policy implications differ between pre- and post-global financial crisis.
Global financial crisis affected the persistence of inflation rates.
First paper to consider the effect of the global financial crisis on inflation persistence.
In his commentary on our recent contribution, Rodney Thom (1976) singles out three points for discussion. He maintains that our model ignores (1) the relative size of…
In his commentary on our recent contribution, Rodney Thom (1976) singles out three points for discussion. He maintains that our model ignores (1) the relative size of economy under analysis; (2) the interdependence of inflation rates between countries operating under fixed exchange rates; and (3) the dependence of the level of exports upon foreign real income. The failure to take these factors into proper account, he contends, may render our conclusions irrelevant.
Students of balance of payments theory are undoubtedly familiar with the various discussions concerning the use of monetary‐fiscal policies to attain internal and external…
Students of balance of payments theory are undoubtedly familiar with the various discussions concerning the use of monetary‐fiscal policies to attain internal and external balance. The seminal contributions to this particular branch of balance of payments theory are commonly associated with R.A. Mundell [1960, 1961, 1962, 1963], though it might be noted, in passing, that the problem had received attention even earlier from W.M.Corden , T.W.Swan , and others. Mundell's efforts, in turn, stimulated during the 1960's a considerable body of literature on the subject, a representative sample of which includes contributions by Fleming , H.G. Johnson , Krueger , Levin , Ott and Ott , and Sohmen . That the subject continues to command interest is evidenced by such recent papers as those of Argy , Fausten , Leighton , Wrightsman , and Zelder, Ross, and Collery . Moreover, it is quite apparent that this interest is further reinforced by the current preoccupation with the implications of the proposed European monetary unification for the domestic policies of the individual EEC countries.
A number of recent papers have raised serious questions about the validity of the German dominance hypothesis, using Granger (temporal) causality tests. If Germany…
A number of recent papers have raised serious questions about the validity of the German dominance hypothesis, using Granger (temporal) causality tests. If Germany dominates within the European Monetary System, then German monetary policy, measured by either money stocks or interest rates should Granger (temporally) cause other EMS countries’ monetary policies, but not vice versa. Empirical evidence leads analysts to conclude that the German dominance hypothesis is invalid, or at a minimum, in need of significant reformulation. Explores similar Granger causality tests, using the recent cointegration and error‐correction modelling strategy, for the US and a group of developing countries during the Bretton Woods period, where conventional wisdom suggests that US policy dominated. Finds significant evidence of two‐way causality between the US money stock and the money stocks of a large number of developing countries. These findings raise a serious questions about the interpretation and/or appropriateness of the Granger causality test for investigating policy dominance hypotheses.
The international linkages between money stocks (and inflationrates) has received much attention. Focuses on the advantages anddisadvantages of fixed and flexible exchange…
The international linkages between money stocks (and inflation rates) has received much attention. Focuses on the advantages and disadvantages of fixed and flexible exchange rate regimes. Fixed rate systems require credible commitments to the rules of the game by the central banks involved. Credible commitment can be achieved through cooperative (symmetric) or coercive (asymmetric) regimes. Did the USA (Germany) dominate other developed (European) countries during the Bretton Woods (European Monetary) system? Examines the linkages, if any, between the USA (German) money stock and money stocks in other developed (European) countries, using the cointegration and error‐correction methodology. Finds evidence that USA (German) money stock did affect other (European) countries′ money stocks during fixed exchange rates. Finds, also, reverse causality which raises serious questions about either the dominance of the USA (Germany) within the Bretton Woods (European Monetary) system, or the usefulness of causality tests is answering such questions.
The relationship between government expenditure and economic growth has been extensively studied both in public finance literature and in the literature dealing with…
The relationship between government expenditure and economic growth has been extensively studied both in public finance literature and in the literature dealing with macroeconomic modelling.In public finance the issue dates back to Adolph Wagner (1890) or even before. But Wagner is known to have presented the idea in its modern form. Wagner essentially presented a behavioral statement about the growth of public expenditure which, after some refinements by others, has come to be known as the Wagner's hypothesis (WH). According to this, the growing importance of the state activity and therefore public expenditure is an inevitable feature of a progressive society. In modern literature, the proposition is formulated as follows: as per capita income rises, the share of the public sector increases because:(1) protective and administrative functions of the state expand,(2)state activities pertaining to culture and education expand, and (3) increasing tendency towards monopoly due to technological advancement and increasing returns to scale need to be offset by state actions.The WH is often considered to represent a long‐term relationship which is expected to apply to countries during their early stages of growth and development. The implication of WH is that the causation runs from economic growth to growth in government expenditure. A more important implication of this hypothesis, however, is that government expenditure does not qualify as development finance because it plays no role in economic growth.
This study surveys the money market integration literature over the past three decades. Generalizations include (1) global money market integration is increasing over time…
This study surveys the money market integration literature over the past three decades. Generalizations include (1) global money market integration is increasing over time although evidence of remaining market segmentation is prevalent and (2) emerging Asian capital markets are rapidly becoming an integral part of world markets.
How do transnational social movements organize? Specifically, this paper asks how an organized community can lead a nationalist movement from outside the nation. Applying…
How do transnational social movements organize? Specifically, this paper asks how an organized community can lead a nationalist movement from outside the nation. Applying the analytic perspective of Strategic Action Fields, this study identifies multiple attributes of transnational organizing through which expatriate communities may go beyond extra-national supporting roles to actually create and direct a national campaign. Reexamining the rise and fall of the Fenian Brotherhood in the mid-nineteenth century, which attempted to organize a transnational revolutionary movement for Ireland’s independence from Great Britain, reveals the strengths and limitations of nationalist organizing through the construction of a Transnational Strategic Action Field (TSAF). Deterritorialized organizing allows challenger organizations to propagate an activist agenda and to dominate the nationalist discourse among co-nationals while raising new challenges concerning coordination, control, and relative position among multiple centers of action across national borders. Within the challenger field, “incumbent challengers” vie for dominance in agenda setting with other “challenger” challengers.