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1 – 10 of over 41000Mauricio Garita, Celso Fernando Cerezo Bregni and Rodrigo Asturias
The purpose of this academic paper is to analyze Argentina’s inflationary situation through an understanding of its monetary policy over the years, and to identify its effect on…
Abstract
Purpose
The purpose of this academic paper is to analyze Argentina’s inflationary situation through an understanding of its monetary policy over the years, and to identify its effect on the country’s poverty, explaining the relationship between fiat currencies and stable currencies.
Design/methodology/approach
By analyzing the case of Argentina through descriptive methodology, the authors provide information on the use of stable currencies in Argentina and the reasons behind their use.
Findings
Through descriptive research, the authors were able to find out the situation regarding the use of stable currencies in Argentina. We identified how the country’s monetary policy has affected inflation and thus purchasing power parity.
Research limitations/implications
Given that cryptocurrency information is based on privacy, there are certain arguments that must be referred through qualitative aspects.
Practical implications
The importance of stablecoins in high inflation countries.
Social implications
The understanding on how cryptocurrencies are able to maintain purchasing power and help avoid inflation related poverty.
Originality/value
Discussion of cryptocurrency items, specifically stablecoins, has been limited due to their recent emergence and the existing discussion about their legality. The study presents an argument on the use of stablecoins by presenting a case that has not yet been studied.
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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…
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 inflation‐inflation uncertainty nexus for Caribbean countries. The results of the paper may be useful to policymakers in the formulation of fiscal and monetary policy.
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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…
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.
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Vector‐autoregression (VAR), integration, and cointegration models are used to investigate the causal relations, dynamic interaction, and a common trend between interest rates and…
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.
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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…
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.
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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…
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.
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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…
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.
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Property returns are normally measured against the target rate for similar investments with comparable risks and liquidity. However, this analysis is normally undertaken in…
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.
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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.
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.
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).
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