Publication Year: within 5 Years / Topic: Inflation

Author:: Kristin Forbes, Joseph E. Gagnon, and Christopher G. Collins
Publication Date:: 03-2020
Content Type:: Working Paper
Institution:: Peterson Institute for International Economics
Abstract:: This paper models inflation by combining the multicountry framework of one of its authors (Forbes) with the nonlinear specification proposed by the other two (Gagnon and Collins). The results find strong support for a Phillips curve that becomes nonlinear when inflation is low, in which case excess economic slack has little effect on inflation. This finding is consistent with evidence of downward nominal wage and price rigidity. The estimates also show a significant and economically meaningful Phillips curve relationship between slack and inflation when slack is negative (i.e., when output is above long-run potential). In this nonlinear model, international factors play a large role in explaining headline inflation, a role that has increased over time, supporting the results of Forbes’ linear model.
Topic:: Economics, Inflation, and Data
Political Geography:: Global Focus

Author:: Dongue Ndongo Patrick Revelli
Publication Date:: 01-2020
Content Type:: Research Paper
Institution:: African Economic Research Consortium (AERC)
Abstract:: Understanding how domestic prices adjust to the exchange rate enables us to anticipate the effects on inflation and monetary policy responses. This study examines the extent of the exchange rate pass-through to the Consumer Price Index in Cameroon and Kenya over the 1991-2013 period. The results of its econometric analysis shows that the degree of the exchange rate pass-through is incomplete and varied between 0.18 and 0.58 over one year in Kenya, while it varied between 0.53 and 0.89 over the same period in Cameroon. For the long term, it was found to be equal to 1.06 in Kenya and to 0.28 in Cameroon. A structural VAR analysis using impulse-response functions supported the results for the short term but found a lower degree of pass-through for the exchange rate shocks: 0.3125 for Kenya and 0.4510 for Cameroon. It follows from these results that the exchange rate movements remain a potentially important source of inflation in the two countries. Variance decomposition shows that the contribution of the exchange rate shocks is modest in the case of Kenya but significant in that of Cameroon.
Topic:: Development, Economics, Monetary Policy, Exchange Rate Policy, Economic Policy, and Inflation
Political Geography:: Kenya, Africa, and Cameroon

Author:: Steve H. Hanke
Publication Date:: 06-2020
Content Type:: Journal Article
Journal:: The Cato Journal
Institution:: The Cato Institute
Abstract:: Monetary instability poses a threat to free societies. Indeed, currency instability, banking crises, soaring inflation, sovereign debt defaults, and economic booms and busts all have a common source: monetary instability. Furthermore, all these ills induced by monetary instability bring with them calls for policy changes, many of which threaten free societies. One who understood this simple fact was Karl Schiller, who was the German Finance Minister from 1966 until 1972. Schiller’s mantra was clear and uncompromising: “Stability is not everything, but without stability, everything is nothing” (Marsh 1992: 30). Well, Schiller’s mantra is my mantra. I offer three regime changes that would enhance the stability in what Jacques de Larosière (2014) has asserted is an international monetary “anti-system.” First, the U.S. dollar and the euro should be formally, loosely linked together. Second, most central banks in developing countries should be mothballed and replaced by currency boards. Third, private currency boards should be permitted to enter the international monetary sphere.
Topic:: Debt, Foreign Exchange, Monetary Policy, Developing World, Inflation, and Currency
Political Geography:: Europe, United States of America, and European Union

Author:: Merab Kakulia, Nodar Kapanadze, and Lela Bakhtadze
Publication Date:: 01-2020
Content Type:: Special Report
Institution:: Georgian Foundation for Strategic International Studies -GFSIS
Abstract:: The Quarterly Review of the Georgian Economy is an electronic publication of the Georgian Foundation for Strategic and International Studies (Rondeli Foundation), which aims at informing readers about the ongoing processes within the country’s economy. The review is based on data of official statistics and on expert estimates.
Topic:: Debt, International Trade and Finance, Foreign Direct Investment, Budget, Employment, Economy, Economic growth, Banks, and Inflation
Political Geography:: Eurasia, Caucasus, and Georgia

Author:: Marek Dabrowski
Publication Date:: 03-2020
Content Type:: Special Report
Institution:: Center for Social and Economic Research - CASE
Abstract:: Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not try to bring inflation back to the targeted level of 2%. Rather, they should revise the inflation target downwards and publicly explain the rationale for such a move. Risks to the independence of central banks come from their additional mandates (beyond price stability) and populist politics.
Topic:: Economic growth, Inflation, and Central Bank
Political Geography:: Global Focus

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