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on Monetary Economics |
| By: | Fabio Braggion; Felix von Meyerinck; Nic Schaub; Michael Weber; Michael Weber |
| Abstract: | We study the long-term effects of inflation surges on inflation expectations using Germany as a laboratory. Households living in areas with higher local inflation during the hyperinflation of the 1920s expect higher inflation today, even after controlling for known determinants of historical inflation and inflation expectations and despite facing similar inflation rates today. Our evidence points towards a vertical transmission of inflation experiences from parents to children and a horizontal transmission through collective memory. Differential historical inflation also modulates the updating of expectations to current inflation, the response to economic policies affecting inflation, and financial decisions. We obtain similar results for Polish households residing in formerly German areas. Overall, our findings are consistent with inflationary shocks having a long-lasting impact on attitudes towards inflation, which raises the costs of disinflationary policies by central banks. |
| Keywords: | inflation, inflation expectations, long-term persistence, German hyperinflation |
| JEL: | D14 E31 E71 G41 N14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11679 |
| By: | Elie BOLA BOONGO (UNIKIS - Université de Kisangani) |
| Abstract: | Our study focused on analyzing the effectiveness of monetary policy instruments used in the Democratic Republic of Congo (DRC) from 1987 to 2018. The objective was to examine the impact of these instruments on the effectiveness of the Central Bank of Congo (BCC) monetary policy in combating inflation during this period. To achieve this objective, we employed statistical and econometric methods, including correlation, causality, and VAR modeling. The results show that inflation (INFL) is positively correlated with the deposit rate (TD) and the exchange rate (TXRO), and weakly negatively correlated with the money supply rate (TMM). Our analysis reveals that a positive shock to TD has no immediate effect on inflation but becomes negative in the second period, then positive from the third to the ninth period, and stabilizes from the tenth period onward. Similarly, a positive shock to TXRO has no immediate effect, becomes negative in the second period, then positive from the third to the seventh period, and stabilizes from the tenth period onward. A positive shock to TMM has an immediate negative effect, then becomes positive in the third period, negative in the fourth period, and stabilizes from the seventh period onward. In summary, our analyses indicate that the monetary policy instruments used to reduce inflation were not effective throughout the study period in the DRC. |
| Abstract: | Notre étude a porté sur une analyse de l'efficacité des instruments de politique monétaire utilisés en République Démocratique du Congo (RDC) de 1987 à 2018. L'objectif était d'examiner l'impact de ces instruments sur l'efficacité de la politique monétaire de la Banque Centrale du Congo (BCC) dans la lutte contre l'inflation pendant cette période. Pour atteindre cet objectif, nous avons utilisé des méthodes statistiques et économétriques, incluant la corrélation, la causalité et la modélisation VAR. Les résultats montrent que l'inflation (INFL) est positivement corrélée avec le taux de dépôt (TD) et le taux de change (TXRO), et faiblement négativement corrélée avec le taux de masse monétaire (TMM). Il ressort de nos analyses qu'un choc positif sur le TD n'a pas d'effet immédiat sur l'inflation, mais devient négatif à la deuxième période, puis positif de la troisième à la neuvième période, et stable à partir de la dixième période. Un choc positif sur le TXRO n'a pas d'effet immédiat non plus, devient négatif à la deuxième période, puis positif de la troisième à la septième période, et stable à partir de la dixième période. Un choc positif sur le TMM a un effet négatif immédiat, puis devient positif à la troisième période, négatif à la quatrième période, et stable à partir de la septième période.En sommes, il en découle de nos analyses que les instruments de politique monétaire utilisés pour réduire l'inflation n'ont pas été efficaces sur toute la période étudiée en RDC. |
| Keywords: | Effectiveness, Monetary policy, Instruments, VAR model, Efficacité, politique monétaire, instruments, Modèle VAR |
| Date: | 2023–10–25 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04909630 |
| By: | Francesco Puoti; Fabrizio Pittorino; Manuel Roveri |
| Abstract: | This paper offers a thorough examination of the univariate predictability in cryptocurrency time-series. By exploiting a combination of complexity measure and model predictions we explore the cryptocurrencies time-series forecasting task focusing on the exchange rate in USD of Litecoin, Binance Coin, Bitcoin, Ethereum, and XRP. On one hand, to assess the complexity and the randomness of these time-series, a comparative analysis has been performed using Brownian and colored noises as a benchmark. The results obtained from the Complexity-Entropy causality plane and power density spectrum analysis reveal that cryptocurrency time-series exhibit characteristics closely resembling those of Brownian noise when analyzed in a univariate context. On the other hand, the application of a wide range of statistical, machine and deep learning models for time-series forecasting demonstrates the low predictability of cryptocurrencies. Notably, our analysis reveals that simpler models such as Naive models consistently outperform the more complex machine and deep learning ones in terms of forecasting accuracy across different forecast horizons and time windows. The combined study of complexity and forecasting accuracies highlights the difficulty of predicting the cryptocurrency market. These findings provide valuable insights into the inherent characteristics of the cryptocurrency data and highlight the need to reassess the challenges associated with predicting cryptocurrency's price movements. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.09079 |
| By: | Antonio, Ronald Jeremy; Valera, Harold Glenn; Mishra, Ashok; Pede, Valerien; Yamano, Takashi; Vieira, Bernardo Oliva |
| Abstract: | In recent years, prices fertilizer, cereals and rice prices have increased significantly due to the Russia-Ukraine war and the export restrictions imposed by India. Thus resulting in higher rice prices in the Philippines. This paper examines the dynamic relationship between rice price inflation and key drivers in the Philippines by estimating a panel vector auto-regression model using monthly data from 1994 to 2023. We find evidence that the effect of world rice price shock is generally the larger and more persistent than the effects of other factors. We also find that movements in rice price inflation are explained by domestic fuel price shocks and to a lesser extent by the world urea price shocks. The impulse response functions driven by those three shocks vary over the sample, especially before a change in food policy such as the imposition of the rice tariffication in 2019. Further analysis suggests that El Niño Southern Oscillation shocks tend to induce an inflationary effect on rice prices in high-poverty and rice-sufficient regions. Our results have important food policy implications for rice markets, and offer timely insights into the desirability of current proposals to reduce rice prices for consumers and improve existing support for famers to boost rice production. |
| Keywords: | Panel data, consumer price index, input prices, weather, fuel price persistence shocks, commodities |
| JEL: | C23 E31 N35 Q18 |
| Date: | 2024–04–30 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123641 |
| By: | Lazanoe Rajamarison (Université de Toliara - Université de Toliara) |
| Abstract: | The question that should be asked in this article is to know the period during which inflation took place in Madagascar. It could also be asked in this article whether inflation could have existed, or not, in a country where an institute in charge of monetary issuance, or at least, an organization that deals with monetary regulation did not yet exist? This question arises for specialists in economic history, or for a possible expert, given that the objective of this writing is to detect the existence of a correlation between the use of money in a country with an archaic type economy, and a possible existence of inflation which is a phenomenon generated by the circulation of money. This being posed in the sense that Orthodox theory strives to demonstrate the fact that inflation only occurs in the presence of money and an issuing institute (monetary statistics, among other things for measuring inflation). To be able to answer these questions, it was necessary on our part to carry out a bibliographic review, to carry out surveys with the country's Monetary Issue Institute and at the end to divide this present article into two parts, the first of which will try to provide elements of explanation on the introduction of money within the country, and the extent of its power over the entire environment of exchanges, including its intrinsic value. In the second part, on the other hand, an attempt to create a single Malagasy currency will be developed. It would therefore be presented, in this part, some texts justifying the need for the creation of a specifically Malagasy currency, as well as the reaction of pre-colonial society to this project. Some developments in the Malagasy currency in response to the demand of the colonial economy also flesh out this part, and from these analyses, this study will draw a conclusion on a possible existence, or the opposite, of the phenomenon of price increases throughout the Malagasy economy from the time before and during colonization. In conclusion, inflation is a concept generally unknown to the monarchical era; it was an unsuitable concept because the economy of the time was not yet effectively monetized. On the other hand, the concept of inflation was established little by little when the Malagasy Nation began to adopt the European consumption mode. From the moment the country chose to found its own monetary issuing institute, the operation of the money market causes the variation of the currency circuit and automatically creates the needs of the market in terms of financing and refinancing of the economy. In this sense, the supply and demand of money sets the market price (interest rate) and favors or not the variation in the price level. It would therefore be necessary to advance, following this situation, that inflation is truly a monetary phenomenon. |
| Abstract: | La question qui devrait se poser, dans cet article, est de savoir l'époque pendant laquelle l'inflation a eu lieu à Madagascar. Il pourrait être également demandé dans cet article si l'inflation aurait pu exister, ou non dans un pays où un institut en charge de l'émission monétaire, ou du moins, un organisme qui s'occupe de la réglementation monétaire n'existait pas encore ? Cette question se pose à l'endroit des spécialistes en histoire économique, ou à un éventuel expert, étant donné que l'objectif de cet écrit est de décelé l'existence d'une corrélation entre l'utilisation de la monnaie dans une contrée d'économie de type archaïque, et une éventuelle existence de l'inflation qui est un phénomène généré par la circulation de la monnaie. Ceci étant posé dans le sens où la théorie Orthodoxe s'efforce de démonter le fait que l'inflation ne survienne qu'en présence de la monnaie et d'un institut d'émission (de la statistique monétaire, entre autres pour la mesure de l'inflation). Pour pouvoir répondre à ces questions, il s'avérais nécessaire de notre part, de passer à une revue bibliographique, à des enquêtes auprès de l'Institut d'émission monétaire du pays et à la fin de diviser ce présent article en deux parties, dont la première essaiera apporte des éléments d'explications sur l'introduction de la monnaie à l'intérieur du pays, et l'étendue de son pouvoir sur l'ensemble de l'environnement des échanges, incluant de sa valeur intrinsèque. En deuxième partie, par contre, une tentative de création d'une monnaie unique malagasy sera à développer. Il serait donc exposé, dans cette partie, quelques textes justifiant la nécessité d'une création de monnaie proprement malagasy, ainsi que la réaction de la société pré-coloniale par rapport à ce projet. Quelques évolutions de la monnaie malagasy face à la demande de l'économie coloniale viennent également étoffer cette partie, et à partir de ces analyses, cette étude tirera une conclusion sur une éventuelle existence, ou le contraire, du phénomène de hausse de prix dans l'ensemble de l'économie malagasy de l'époque pré et pendant la colonisation. En conclusion, l'inflation est un concept généralement inconnu de l'époque monarchique ; c'était un concept non adapté car l'économie de l'époque n'est pas encore effectivement monétarisée. Par contre, le concept d'inflation s'établi petit à petit lorsque la Nation malagasy commençait à adopter le mode de consommation des européens. A partir du moment où le pays a choisi de fonder son propre institut d'émission monétaire, le jeu du marché monétaire entraine la variation du circuit de la monnaie et créé automatiquement les besoins du marché en termes de financement et du refinancement de l'économie. Dans ce sens, l'offre et la demande de monnaie fixe le prix du marché (taux d'intérêt) et favorise ou non la variation du niveau des prix. Il serait donc nécessaire d'avancer, suivant cette situation que l'inflation est vraiment un phénomène monétaire. |
| Keywords: | Inflation, Histoire, Monnaie, Madagascar |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04947196 |
| By: | Vîntu, Denis |
| Abstract: | This paper aims to plot interest rates of bonds of equal credit and different maturities. Three kinds of yield curves incorporate normal, inverted, and flat. Ordinary curves highlight monetary extension, and descending inclining curves highlight financial downturn. As well as utilizing the state of the yield curve to assist with deciding the current and future strength of the economy, the yield curve possesses an extraordinary spot contrasted with any remaining yield curves as it is by and large viewed as the "benchmark curve." Yields on Government securities and different protections are for the most part among the least since they're supported by the full confidence and credit of the AAA. This permits security financial backers to contrast the yield curve and that of more dangerous resources, for example, the yield curve of Office securities or A-evaluated corporate securities for instance. The yield contrast between the two is alluded to as the "spread." The nearer the yields are together the more sure financial backers are in facing the challenge in a security that isn't government-supported. The spread for the most part augments during downturns and agreements during recuperations. |
| Keywords: | yield curve, stationarity, random walk, autocorrelation, heteroskedasticity. |
| JEL: | E5 G38 |
| Date: | 2024–03 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123503 |
| By: | Joel Kariel; Anthony Savagar |
| Abstract: | We present empirical evidence on the relationship between demand shocks and price changes, conditional on returns to scale. We find that in industries with decreasing returns to scale, demand increases (which raise costs) correspond to price increases. Whereas, in industries with increasing returns to scale, demand increases (which lower costs) correspond to stable prices. We interpret the results with a theory of imperfect competition and returns to scale. For prices to remain stable following a cost decrease, markups necessarily rise. For prices to increase as cost increases, it is not necessary for markups to change but does not preclude their role. From a macroeconomic perspective, our results imply that inflation dynamics and the effectiveness of monetary policy depend on market structures. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.05898 |
| By: | Luca Gagliardone; Mark Gertler; Simone Lenzu; Joris Tielens |
| Abstract: | We study cost-price dynamics in normal times and during inflation surges. Using microdata on firms’ prices and production costs we construct an empirical measure of price gaps—the deviation between a firm’s listed and optimal price. We then examine the mapping between gaps and price changes in the cross-section of firms and derive implications for inflation dynamics in the time-series. In the microdata, pricing policies display state-dependence: firms are more likely to adjust prices as their price gap widens, a mechanism that becomes quantitatively significant when large aggregate cost shocks occur. In normal times, adjustment probabilities are approximately constant and the microdata conform with the predictions of time-dependent models (e.g., Calvo 1983). Conditional on a path of aggregate cost shocks extracted from the data, we show that a generalized state-dependent pricing model accounts well for the pre-pandemic era’s low and stable inflation and the nonlinear surge observed during the pandemic. |
| JEL: | E0 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33478 |
| By: | Dovonou Lamissi, Vanessa-Paradis Olakemi; Zoe Leiyu Xie |
| Abstract: | This paper provides an empirical estimation of the distributional impact of inflation on households in South Asia. Two main channels are explored—the consumption basket channel and the income channel—for households in different income deciles in selected countries in South Asia. Using recent household expenditure surveys, the paper constructs detailed consumption expenditure shares and the effective “cost-of-living” inflation for households of different income levels. The analysis finds that due to a substantially larger share of food expenditure, households in lower income deciles experience higher effective inflation when food prices are high, despite a diversification in consumption expenditure over time. The analysis also suggests heterogeneous effects of inflation through the household income channel. |
| Date: | 2023–07–25 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10527 |
| By: | de Castro, Luciano; Frischtak, Claudio R.; Rodrigues, Arthur |
| Abstract: | Most developing economies rely on foreign capital to finance their infrastructure needs. These projects are usually structured as long-term (25–35 years) franchises that pay in local currency. If investors evaluate their returns in terms of foreign currency, exchange rate volatility introduces risk that may reduce the level of investment below what would be socially optimal. This paper proposes a mechanism with very general features that hedges exchange rate fluctuation by adjusting the concession period. Such mechanism does not imply additional costs to the government and could be offered as a zero-cost option to lenders and investors exposed to currency fluctuations. This general mechanism is illustrated with three alternative specifications and data from a 25-year highway franchise is used to simulate how they would play out in eight different countries that exhibit diverse exchange rate trajectories. |
| Date: | 2023–09–19 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10568 |
| By: | Elie BOLA BOONGO (UNIKIS - Université de Kisangani) |
| Abstract: | This article examines the challenges of adopting cryptocurrency as legal tender in the Central African Republic (CAR). Cryptocurrencies, which rely on blockchain technology, are decentralized digital currencies that emerged after the subprime mortgage crisis. The global market for these assets is now valued at over $2 trillion. In Africa, the volume of cryptocurrency transactions increased by 1200% between 2018 and 2021, reflecting a growing interest in digital assets. In response, several African countries, including Nigeria, Ghana, and South Africa, are exploring central bank-issued digital currency projects. However, reactions to cryptocurrencies across Africa vary: some countries, like Egypt, have banned them, while others have taken a more open approach.In the Central African Economic and Monetary Community (CEMAC), the Bank of Central African States (BEAC) has expressed concerns about the security of cryptocurrencies and their impact on the banking sector. The CAR's adoption of Bitcoin as official currency in 2022 prompted responses from the BEAC, which recommended conducting a prior study before introducing a central bank digital currency to avoid disrupting the existing economy. Despite these concerns, this initiative in the CAR is seen as a way to open new economic opportunities and promote inclusive growth.The article, however, warns of the risks associated with the lack of a regulatory framework for cryptocurrencies in the CAR. Without regulation, the monetary and banking system, as well as consumers, face various dangers, including extreme volatility of cryptocurrencies, scams, and criminal activities such as money laundering and terrorist financing. It emphasizes the urgent need to regulate this sector to protect users and stabilize the financial system, while also strengthening the capabilities of financial oversight authorities to address the challenges posed by these digital assets. |
| Abstract: | Cet article examine les enjeux de l'adoption de la cryptomonnaie comme monnaie légale en République Centrafricaine (RCA). Les cryptomonnaies, qui reposent sur la technologie blockchain, sont des monnaies numériques décentralisées apparues après la crise des subprimes. Leur marché global est désormais évalué à plus de 2000 milliards de dollars. En Afrique, le volume des transactions en cryptomonnaies a augmenté de 1200% entre 2018 et 2021, témoignant d'un intérêt croissant pour ces actifs numériques. En réponse, plusieurs pays africains, comme le Nigeria, le Ghana et l'Afrique du Sud, explorent des projets de monnaies digitales émises par leurs banques centrales. Cependant, les réactions face aux cryptomonnaies en Afrique varient: certains pays, tels que l'Égypte, les interdisent, tandis que d'autres adoptent une approche plus ouverte. Dans la Communauté Économique et Monétaire de l'Afrique Centrale (CEMAC), la Banque des États de l'Afrique Centrale (BEAC) a exprimé des inquiétudes concernant la sécurité des cryptomonnaies et leurs répercussions sur le secteur bancaire. L'adoption du Bitcoin par la RCA comme monnaie officielle en 2022 a déclenché des réactions de la BEAC, qui recommande une étude préalable avant l'introduction d'une monnaie numérique de banque centrale afin de ne pas perturber l'économie existante. Malgré ces préoccupations, en RCA, cette initiative est perçue comme un moyen d'ouvrir de nouvelles perspectives économiques et de promouvoir une croissance inclusive. L'article met toutefois en garde contre les risques liés à l'absence de cadre réglementaire pour les cryptomonnaies en RCA. Sans réglementation, le système monétaire et bancaire, ainsi que les consommateurs, sont exposés à divers dangers, notamment la volatilité extrême des 1 Chercheur indépendant en économie monétaire, financière et internationale, doctorant en sciences économiques à l'université de Kisangani. cryptomonnaies, les arnaques et les activités criminelles, telles que le blanchiment d'argent et le financement du terrorisme. Il souligne l'urgence de réguler ce secteur pour protéger les utilisateurs et stabiliser le système financier, tout en renforçant les capacités des autorités de surveillance financière afin de faire face aux défis posés par ces actifs numériques. |
| Keywords: | Cryptomonnaie, Monnaie Légale, Monnaie Numérique Banque Centrale, Bitcoin Crypto-Currency, legal tender, Central Bank Digital Currency, Bitcoin |
| Date: | 2023–10–25 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04909680 |
| By: | Baumann, Michael Heinrich; Janischewski, Anja |
| Abstract: | Financial bubbles and crashes have repeatedly caused economic turmoil notably but not only during the 2008 financial crisis. However, both in the popular press as well as scientific publications, the meaning of bubble is sometimes unspecified. Due to the multitude of bubble definitions, we conduct a systematic review with the following questions: What definitions of asset price bubbles exist in the literature? Which definitions are used in which disciplines and how frequently? We develop a system of definition categories and categorize a total of 122 papers from eleven research areas. Our results show that although one definition is indeed prevalent in the literature, the overall definition landscape is not uniform. Next to the mostly used definition as deviation from a present value of expected future cash flows, we identify several other definitions, which rely on price properties or other specifications of a fundamental value. This research contributes by shedding light on the possible variations in which bubbles are defined and operationalized. |
| Keywords: | asset price bubble; fad; financial crisis; local martingale; fundamental analysis |
| JEL: | G01 G12 G14 G18 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123676 |
| By: | Horn, Sebastian Andreas; Parks, Bradley Christopher; Reinhart, Carmen M.; Trebesch, Christoph |
| Abstract: | This paper shows that China has launched a new global system for cross-border rescue lending to countries in debt distress. It builds the first comprehensive dataset on China’s overseas bailouts between 2000 and 2021 and provide new insights into China’s growing role in the global financial system. A key finding is that the global swap line network put in place by the People’s Bank of China is increasingly used as a financial rescue mechanism, with more than USD 170 billion in liquidity support extended to crisis countries, including repeated rollovers of swaps coming due. The swaps bolster gross reserves and are mostly drawn by distressed countries with low liquidity ratios. In addition, we show that Chinese state-owned banks and enterprises have given out an additional USD 70 billion in rescue loans for balance of payments support. Taken together, China’s overseas bailouts correspond to more than 20 percent of total IMF lending over the past decade and bailout amounts are growing fast. However, China’s rescue loans differ from those of established international lenders of last resort in that they (i) are opaque, (ii) carry relatively high interest rates, and (iii) are almost exclusively targeted to debtors of China's Belt and Road Initiative. These findings have implications for the international financial and monetary architecture, which is becoming more multipolar, less institutionalized, and less transparent. |
| Date: | 2023–03–27 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10380 |
| By: | Rufai, Aliyu; Udaah, Isaiah; Salisu, Afees |
| Abstract: | This study utilizes a newly constructed index for financial stress to examine its predictive value for exchange rate volatility in sub-Saharan Africa (SSA). Using a methodology that accounts for the key features of the predictive model, we find that financial stress significantly and positively affects exchange rate volatility in SSA. This indicates that increased financial stress is linked to higher levels of exchange rate volatility in the region. A robustness check conducted on OECD countries shows that financial stress does not elevate exchange rate volatility in those countries. These findings support the purchasing power parity (PPP) theory in SSA, where financial stress amplifies exchange rate fluctuations, whereas in OECD countries, the effects are weaker and less statistically significant. In light of these findings, policymakers in sub-Saharan Africa should prioritize enhancing the financial system stability to better protect against external shocks. |
| Keywords: | Exchange rate volatility; Financial stress; Sub-Saharan Africa; Purchasing power parity |
| JEL: | C58 D53 G15 |
| Date: | 2023–12–23 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123573 |
| By: | Richhild Moessner |
| Abstract: | This paper studies the effects of country-specific energy prices on food consumer price inflation (CPI) within a cross-country Phillips curve framework. It considers a panel of 36 OECD member and candidate economies using quarterly data from the start of 1994 to the end of 2021. We find that energy CPI inflation has a significantly positive effect on food CPI inflation, after controlling for the output gap, exchange rate changes and global factors. This result is generally robust to also controlling for inflation expectations, global food commodity prices and core CPI inflation. We also find that the effect of energy CPI inflation on food CPI inflation is significantly larger when energy dependency is higher. |
| Keywords: | inflation, food prices, energy prices |
| JEL: | E31 E52 E58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11682 |
| By: | Lokshin, Michael M.; Sajaia, Zurab; Torre, Ivan |
| Abstract: | This paper constructs cost-of-living indexes for different groups of households to quantify the differences in the distribution of the burden of high inflation among the populations of countries in Europe and Central Asia. The analysis demonstrates that the cost-of-living crisis of 2022–23 has had a heterogeneous impact on European populations. Poor households appear to suffer the most from rising food and energy prices. Poverty and inequality rates and the profiles of the poor based on household-specific inflation rates systematically differ from those based on the standard consumer price index approach. Accounting for the variability of inflation rates across household types might help policy makers design policies that better protect vulnerable households and promote economic growth. |
| Date: | 2023–04–06 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10377 |
| By: | Yiming Ma; Kairong Xiao; Yao Zeng |
| Abstract: | Liquidity provision is often attributed to debt-issuing intermediaries like banks. We develop a unified theoretical framework and empirically show that mutual funds issuing demandable equity also provide an economically significant amount of liquidity by insuring against idiosyncratic liquidity shocks. Quantitatively, bond funds provide 12.5% of the liquidity that banks provide per dollar. Our model further shows that when equity values incorporate the liquidation cost from redemptions, as in swing pricing, liquidity provision is not necessarily reduced. This is because swing pricing may increase funds' capacity for holding illiquid assets without inducing panic runs. |
| JEL: | G2 G21 G23 G28 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33472 |
| By: | Felipe Alves; Giovanni L. Violante |
| Abstract: | The current monetary policy framework of the Fed intends to be more ’inclusive’ by running the economy hot for longer during expansions. The logic of this strategy rests on Okun’s (1973) hypothesis that sustaining a ‘high-pressure economy’ persistently improves labor market outcomes of low-wage workers. To evaluate this conjecture, we develop a Heterogeneous Agent New Keynesian framework with a three-state frictional model of the labor market where low-skilled workers are more exposed to the business cycle and recessions have a long-lasting effect on their labor force participation and earnings, in line with the evidence. Under a canonical Inflation Targeting rule, the ZLB generates a deflationary bias and severely amplifies the persistent scars of recessions at the bottom of the wage distribution. The Lower-for-Longer strategy is an effective antidote to the ZLB-driven hysteresis and leads to notable earnings gains for low-wage workers and a reduction to overall earnings inequality. If pursued aggressively, however, the policy reverts the inflation bias from negative to positive. Since policymakers might prioritize differently inflation relative to inclusion, we conclude by quantifying the inflation-inclusion trade-off implied by various monetary policy rules. |
| JEL: | E10 E30 E5 J63 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33488 |
| By: | Jiranyakul, Komain |
| Abstract: | Asymmetric impacts of oil price shocks on key macroeconomic variables are caused by some important effects, such as income effect, uncertainty effect, precautionary saving effect, irreversible investment and reallocation effects. Due to these effects, output and prices respond diferently to oil price increases and decreases. This asymmetry hypothesis has been empirically tested by many economists. This paper surveys recent empirical studies on the asymmetric impacts of oil price shocks on economic activity and inflation in Asia. The empirical findings in Asian economies shows that the responses of output growth oil price shocks in Japan and South Korea tend to be asymmetric while the responses of inflation seem to be symmetric. For China, the largest oil-importing in Asia, the empirical results show that asymmetry is increasingly discovered. The results of the responses of inflation to oil price shocks in China do not favor the asymmetry hypothesis. The findings in the ASEAN5 economies are likely to support the symmetry hypothesis. In South Asian economies, only few studies favor the asymmetry hypothesis. Because empirical results for other Asian countries are not widely investigated, it is too early to draw some conclusions. One important finding is that Asian oil-exporting countries, Indonesia, Malaysia, and Vietnam, might not escape the adverse impacts of oil price shocks on output growth. Since output and inflation can be unfavorably affected by oil price shocks, some researchers will recommend accommodative monetary policy along with exchange rate policy to stabilize the responses of output and prices when oil price tends to increase. |
| Keywords: | Oil price shocks, output growth, inflation, asymmetric and symmetric impacts, Asian economies |
| JEL: | E31 E32 Q43 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123664 |