The Role Of Expectations In The Inflation Process In A Period Of Exchange Rate Shock
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The Role Of Expectations In The Inflation Process In A Period Of Exchange Rate Shock
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Author : ümit koç
language : en
Publisher:
Release Date : 2022
The Role Of Expectations In The Inflation Process In A Period Of Exchange Rate Shock written by ümit koç and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.
In this paper, we analyze the role of inflation expectations in inflation dynamics. The hike in inflation in Turkey following the exchange rate shock in 2018 provides an interesting period to analyze whether the sensitivity of inflation to its main determinants, including expectations, has changed. To this end, we estimate a time-varying parameter Phillips curve model to focus on the changes in inflation dynamics. We also jointly study the formation of inflation expectations to further investigate how the setting of inflation expectations evolved over the course of the rapid rise and the following gradual decline in inflation observed since the second half of 2018. Our results reveal that inflation expectations play an important role in inflation dynamics; and that the sensitivity of inflation to expectations did not change much recently. Meanwhile, the sensitivity of inflation to the exchange rate has sharply risen and corrected only partially afterwards. However, the most notable change has been witnessed in the weight attached to the past inflation in forming expectations; agents pay higher attention to inflation realizations. Overall, our results reveal that inflation expectations and the exchange rate movements are the leading driving forces of inflation in Turkey, in which the interaction between them further amplifies the impact on inflation.
Inflation Expectations
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Author : Peter J. N. Sinclair
language : en
Publisher: Routledge
Release Date : 2009-12-16
Inflation Expectations written by Peter J. N. Sinclair and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-12-16 with Business & Economics categories.
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Exchange Rate Second Round Effects And Inflation Processes
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Author : Eliphas Ndou
language : en
Publisher: Springer
Release Date : 2019-04-23
Exchange Rate Second Round Effects And Inflation Processes written by Eliphas Ndou and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-04-23 with Business & Economics categories.
This book focuses on the exchange rate pass-through (ERPT), second round effects and the inflation process in South Africa. The authors demonstrate that magnitudes of the second round effects of the exchange rate depreciation and oil price shocks depend on inflation regimes. The impact of positive oil price shocks on inflation is weakened by monetary policy credibility. Evidence shows the influence of oil price on unit labour costs and correlation between exchange rate changes and inflation has weakened. In addition, ERPT is reduced by low business and consumer confidence, high trade openness, low inflation and high exchange rate volatility which weaken real economic activity. Both monetary and fiscal policy credibility lowers the sizes of ERPT to inflation and inflation expectations. Fiscal policy via fuel levies, administered prices and public transport inflation channel impacts the responses of monetary policy to inflation shocks. The authors show that second round effects contribute very little to wage inflation following an exchange rate depreciation shock. Both lending rate and household consumption responds asymmetrical to repo rate changes. This book will appeal to policymakers, students, academics and analysts.
Expectations Anchoring And Inflation Persistence
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Author : Mr.Rudolfs Bems
language : en
Publisher: International Monetary Fund
Release Date : 2018-12-11
Expectations Anchoring And Inflation Persistence written by Mr.Rudolfs Bems and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-12-11 with Business & Economics categories.
Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an empirical assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct a novel index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies starting in 1989. We then study the response of consumer prices to terms-of-trade shocks for countries with flexible exchange rates. We find that these shocks have a significant and persistent effect on consumer price inflation when expectations are poorly anchored. By contrast, inflation reacts by less and returns quickly to its pre-shock level when expectations are strongly anchored.
Why Inflation Targeting
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Author : Charles Freedman
language : en
Publisher: International Monetary Fund
Release Date : 2009-04-01
Why Inflation Targeting written by Charles Freedman and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-04-01 with Business & Economics categories.
This is the second chapter of a forthcoming monograph entitled "On Implementing Full-Fledged Inflation-Targeting Regimes: Saying What You Do and Doing What You Say." We begin by discussing the costs of inflation, including their role in generating boom-bust cycles. Following a general discussion of the need for a nominal anchor, we describe a specific type of monetary anchor, the inflation-targeting regime, and its two key intellectual roots-the absence of long-run trade-offs and the time-inconsistency problem. We conclude by providing a brief introduction to the way in which inflation targeting works.
Inflation In Emerging And Developing Economies
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Author : Jongrim Ha
language : en
Publisher: World Bank Publications
Release Date : 2019-02-24
Inflation In Emerging And Developing Economies written by Jongrim Ha and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-02-24 with Business & Economics categories.
This is the first comprehensive study in the context of EMDEs that covers, in one consistent framework, the evolution and global and domestic drivers of inflation, the role of expectations, exchange rate pass-through and policy implications. In addition, the report analyzes inflation and monetary policy related challenges in LICs. The report documents three major findings: In First, EMDE disinflation over the past four decades was to a significant degree a result of favorable external developments, pointing to the risk of rising EMDE inflation if global inflation were to increase. In particular, the decline in EMDE inflation has been supported by broad-based global disinflation amid rapid international trade and financial integration and the disruption caused by the global financial crisis. While domestic factors continue to be the main drivers of short-term movements in EMDE inflation, the role of global factors has risen by one-half between the 1970s and the 2000s. On average, global shocks, especially oil price swings and global demand shocks have accounted for more than one-quarter of domestic inflation variatio--and more in countries with stronger global linkages and greater reliance on commodity imports. In LICs, global food and energy price shocks accounted for another 12 percent of core inflation variatio--half more than in advanced economies and one-fifth more than in non-LIC EMDEs. Second, inflation expectations continue to be less well-anchored in EMDEs than in advanced economies, although a move to inflation targeting and better fiscal frameworks has helped strengthen monetary policy credibility. Lower monetary policy credibility and exchange rate flexibility have also been associated with higher pass-through of exchange rate shocks into domestic inflation in the event of global shocks, which have accounted for half of EMDE exchange rate variation. Third, in part because of poorly anchored inflation expectations, the transmission of global commodity price shocks to domestic LIC inflation (combined with unintended consequences of other government policies) can have material implications for poverty: the global food price spikes in 2010-11 tipped roughly 8 million people into poverty.
Asset Prices And Monetary Policy
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Author : John Y. Campbell
language : en
Publisher: University of Chicago Press
Release Date : 2008-11-15
Asset Prices And Monetary Policy written by John Y. Campbell and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-11-15 with Business & Economics categories.
Economic growth, low inflation, and financial stability are among the most important goals of policy makers, and central banks such as the Federal Reserve are key institutions for achieving these goals. In Asset Prices and Monetary Policy, leading scholars and practitioners probe the interaction of central banks, asset markets, and the general economy to forge a new understanding of the challenges facing policy makers as they manage an increasingly complex economic system. The contributors examine how central bankers determine their policy prescriptions with reference to the fluctuating housing market, the balance of debt and credit, changing beliefs of investors, the level of commodity prices, and other factors. At a time when the public has never been more involved in stocks, retirement funds, and real estate investment, this insightful book will be useful to all those concerned with the current state of the economy.
Inflation News And Euro Area Inflation Expectations
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Author : Juan Angel Garcia
language : en
Publisher: International Monetary Fund
Release Date : 2018-07-19
Inflation News And Euro Area Inflation Expectations written by Juan Angel Garcia and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-07-19 with Business & Economics categories.
Do euro area inflation expectations remain well-anchored? This paper finds that the protracted period of low (and below-target) inflation in the euro area since 2013 has weakened their anchoring. Testing their sensitivity to inflation and macroeconomic news, this paper expands existing results in two key dimensions. First, by analyzing all available (advanced) inflation releases. Second, the reactions of expectations are investigated at daily, time-varying and intraday frequency regressions to add robustness to our conclusions. Results point to a significant impact of inflation news over recent years that had not been observed before in the euro area.
International Dimensions Of Monetary Policy
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Author : Jordi Galí
language : en
Publisher: University of Chicago Press
Release Date : 2010-03-15
International Dimensions Of Monetary Policy written by Jordi Galí and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-03-15 with Business & Economics categories.
United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.
Exchange Rates And Inflation
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Author : Rudiger Dornbusch
language : en
Publisher: MIT Press
Release Date : 1988
Exchange Rates And Inflation written by Rudiger Dornbusch and has been published by MIT Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1988 with Business & Economics categories.
Collected for the first time in Exchange Rates and Inflation, twenty-two articles are gathered in four parts covering exchange rate theory, special topics in exchange rate economics, equilibrium real exchange rates, and inflation and stabilization.