Inflation Dynamics

This paper employs the recently developed structural stability test with multiple regime shifts and grid bootstrapping methods to model US inflation dynamics over the past half century. Our empirical results suggest that the persistence of inflation has witnessed significant declines over the most recent period of low inflation and this helps to embed a low inflation environment. The finding is

Equilibrium growth rate stated by us is based on equilibrium evolution of economy IS-LM-SRAS, where the equations IS and LM are liniar specificated in real GDP, nominal interest rate and real wealth, and the SRAS curve is also linear, infered from linear Phillips curve. The evolution of the economy is determined from two dynamic continuous time equations: the dynamics of expected inflation rate, specified as adaptive mechanism with respect to current inflation rate, and the wealth dynamics, the last arising from the policy of budget deficit finance. As a consequence, the dynamics of economy depends on the policies of the government and the Central Bank. The paper comprises three parts: the dynamic model deduction, long run and short run dynamics of the economy, money finance debt, when b b t = policy is applied, deduction of the equilibrium growth rate for this policy.

We evaluate the role of oil prices shocks in explaining inflation dynamics in the post war US period. In doing so, we use the second order solution of a benchmark New Keynesian framework when the economy is hit by an oil price shock. The second order solution permits us to relax the certainty equivalence assumption generating a risk-premium over inflation absent in a log-linear approximation. We find , in contrast with Clarida Galí and Gertler (QJE, 2000), that oil price shocks rather than differences in the monetary policy rules between the pre-Volcker and post-Volcker periods, are the main driving forces that explain high and persistent levels of inflation during the 70´s. The mechanism works as follows: an increase in the volatility of oil prices fits into the marginal costs of firms through the production function and increases output volatility in equilibrium. The convexity of the Phillips curve is crucial to generate an increasing function between the volatility of output and ...

The first step in any kind of research is to select the most adequate research methodology. There are a lot of research methodologies to chose from when one wants to engage in research regarding the development of financial performance models. Because of this abundance, there is a need to present the most important ones. In this paper I describe the

This paper has two objectives. First of all, it proposes a dynamic scenario analysis approach, which is a revised version of extended anomaly relaxation (EFAR) model [J. Operat. Res. Soc. 48 (1997) 793]; hereafter referred to as REFAR. REFAR aims to eliminate the basic drawbacks of EFAR and improve its efficiency. The basic steps of REFAR are presented and the improvement with respect to the original version realized in each step is emphasized. The second objective of the study is to estimate the future of inflation in Turkey through REFAR using data corresponding to the period January 1994–December 1998. The main reasons for selecting REFAR-based inflation estimation instead of adopting traditional forecasting techniques are explained. The basic scenarios finally reached through REFAR, the transition among each key scenario as well as among the scenarios grouped under each key scenario are explained in detail and the validity of the REFAR-based inflation estimation model is tested ...

We examine the dynamics of output growth and inflation in the US, Euro area and UK using a structural time varying coefficient VAR. There are important similarities in structural inflation dynamics across countries; output growth dynamics differ. Swings in the magnitude of inflation and output growth volatilities and persistences are accounted for by a combination of three structural shocks. Changes over time in the structure of the economy are limited and permanent variations largely absent. Changes in the volatilities of structural shocks matter.

This study examines the dynamics and determinants of inflation in the Ottoman Empire during the 1586-1913 period. There might be two main reasons for inflation: fiscal expansion and monetary expansion where the monetary expansion could be generated through the debasement of local currency (Akçe). We used a set of political and structural variables in order to explain the change in the inflation dynamics. In particular, we considered the war years, periods of Ottoman history which show different characteristics (the slow down period, the recession period and the break up period) and the period of constitutional monarchy. Moreover, we tested if the inflation process was the same for each sultan and all of the sultan behaved differently from the rest of their reign during their first year. Accordingly, the empirical evidence reported here suggests that war accelerated inflation as expected and fiscal expansion rather than the debasement of the Akçe was a main reason for inflation. More...

Recent cross-country empirical evidence indicates that the money-prices relationship depends on the average rate of inflation. This relationship is strong in economies with high inflation, but weakens under low inflation. Based on these findings, we study the dependence of the money-prices relationship on the level of inflation in Argentina along the last 35 years. We use descriptive analysis as well

We estimate a pricing equation or “new Keynesian Phillips curve” (NKPC) obtained from a structural dynamic model of price setting based on Rotemberg [1982. Sticky prices in the United States. Journal of Political Economy 90(6), 1187–1211] and extended to capture ...

We evaluate the role of oil prices shocks in explaining inflation dynamics in the post war US period. In doing so, we use the second order solution of a benchmark New Keynesian framework when the economy is hit by an oil price shock. The second order solution permits us to ...

Inflation is usually defined as a generalized and persistent change in the price level. But this notion seems to be restricted to à la Cagan high inflations of a monetary origin, in which absolute price change prevails. It is not obvious, though, that inflation dynamics is always dominated by a strong comovement in sectoral prices. Nor that absolute price changes predominate over relative price adjustment. What is more, it is expected that in normal times, when inflation remains at a low level, transitory movements in prices explain a high portion of inflation variability, because inflation does not follow a trend but instead evidences erratic movements that on average tend to cancel out. Under high inflation, the presence of a trend in aggregate inflation reflects in a relatively higher importance of the common component in price variations. That is, more comovement in price adjustments, which not necessarily implies the absence of persistent, medium term relative price adjustments...