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Exogenous shifts in international food commodity prices, which are identified using an SVAR model with global harvest shocks as an external instrument, explain almost 30% of euro-area inflation volatility over the medium term and contributed significantly to the twin puzzle of missing (dis)inflation in the era after the Great Recession. International food price shocks have an impact on food retail prices through the food production chain, but also trigger indirect inflationary effects via a depreciation of the euro and, most important, rising wages. Finally, due to asymmetric wage responses, the inflationary effects are very different across member states.

The objective of this thesis was to estimate the threshold effects of inflation on economic growth in Rwanda. Time-series data from 1972-2021 were accessed from World Bank and analyzed using both LS and 2SLS Threshold Model. GDP growth rate, investment growth rate, inflation rate and population growth rate and other instrumental variables were used to model the equation estimated. Therefore, the study explored the threshold level of inflation being 6 percent, which means that below 6% stimulate the economy growth while beyond it can hamper economic growth. Mainly, the findings proved that Rwanda has a moderate inflation threshold level compared to other developing countries whereby inflation threshold fluctuate above 6% and 15%. Concluding, this research revealed the up bound where inflation rate should not go beyond for stimulating the economy and it is known that low inflation rate drives the economic growth. So, there is a need to conduct a research for determining that low level of inflation that could not affect the economic growth. As well, other researchers are called upon to conduct the research on the effect of inflation threshold in Rwanda using other techniques and variables for exploring inflation dynamics on economic growth in advance. Keywords: Inflation threshold level; economic growth; inflation rate; inflation dynamics; time series. Title: THRESHOLD EFFECTS OF INFLATION ON ECONOMIC GROWTH IN RWANDA Author: NSABIYAREMYE JEAN D’AMOUR International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online) Vol. 10, Issue 2, October 2022 - March 2023 Page No: 364-372 Research Publish Journals Website: www.researchpublish.com Published Date: 24-January-2023 DOI: https://doi.org/10.5281/zenodo.7565502 Paper Download Link (Source) https://www.researchpublish.com/papers/threshold-effects-of-inflation-on-economic-growth-in-rwanda, International Journal of Management and Commerce Innovations, ISSN 2348-7585 (Online), Research Publish Journals, Website: www.researchpublish.com, {"references":["[1]\tAbuselidze, G. and Shota Rustaveli, B., 2019. Modern Challenges of Monetary Policy Strategies: Inflation and Devaluation Influence on Economic Development of the Country. Academy of Strategic Management Journal,","[2]\tAdrián Risso, W. and Sánchez Carrera, E.J., 2009. Inflation and Mexican economic growth: long‐run relation and threshold effects. Journal of Financial Economic Policy, 1(3), pp.246–263. https://doi.org/10.1108/1757638091 1041728.","[3]\tArlt, J. and Arltova, M., 2016. Forecasting of the Annual Inflation Rate in the Unstable Economic Conditions. Proceedings - 2015 2nd International Conference on Mathematics and Computers in Sciences and in Industry, MCSI 2015, pp.231–234. https://doi.org/10.1109/MCSI.2015.34.","[4]\tAsab, N.A. and Al-Tarawneh, A., 2020. Inflation thresholds and stock market development: Evidence of the nonlinear nexus from an emerging economy. International Journal of Financial Research, 11(1), pp.447–461. https://doi.org/10.5430/IJFR.V11N1P447.","[5]\tAzam, M. and Khan, S., 2020. Threshold effects in the relationship between inflation and economic growth: Further empirical evidence from the developed and developing world. International Journal of Finance and Economics. https://doi.org/10.1002/ijfe.2368.","[6]\tBawa, S. and Abdullahi, I.S., 2012. Threshold Effect of Inflation on Economic Growth in Nigeria. CBN Journal of Applied Statistics, 3(1), pp.43–63.","[7]\tBehera, J. and Mishra, A.K., 2017. The Recent Inflation Crisis and Long-run Economic Growth in India: An Empirical Survey of Threshold Level of Inflation. South Asian Journal of Macroeconomics and Public Finance, 6(1), pp.105–132. https://doi.org/10.1177/2277978717695154.","[8]\tBenjamin, F., 2000. Monetary Policy. National Bureau of Economic Research. Cambridge.","[9]\tBenoit, K., 2011. Linear Regression Models with Logarithmic Transformations. London School of Economics, 22(1), pp.23–26.","[10]\tBhambri, G. and Rani, K., 2021. Contemporary 'Policies & Programmes' of Government of India for Rising Export of Textile Products & Fabrics & It's Impact-Especially in Haryana. International Journal of Management (IJM), [online] 12(2), pp.839–848. https://doi.org/10.34218/IJM.12.2.2021.082.","[11]\tBick, A., 2010. Threshold effects of inflation on economic growth in developing countries. Economics Letters, 108(2).","[12]\tBreer, V. v., 2017. Models of tolerant threshold behavior (from T. Schelling to M. Granovetter). Automation and Remote Control 2017 78:7, [online] 78(7), pp.1304–1318. https://doi.org/10.1134/S0005117917070128.","[13]\tChabe, L., 2015. The Impact of Foreign Direct Investment on the Economic Growth of Cameroon. Eastern Mediterranean University.","[14]\tDoguwa, S.I., 2012. Inflation and Economic Growth in Nigeria: Detecting the Threshold Level. JAS) CBN Journal of Applied Statistics (JAS), 3(2), pp.12–2012.","[15]\tDritsaki, C., 2015. Forecasting Real GDP Rate through Econometric Models: An Empirical Study from Greece. Journal of International Business and Economics, 3(1), pp.2374–2194. https://doi.org/10.15640/jibe.v3n1a2."]}

Received December 20, 2022; accepted February 28, 2023. Дата поступления 20 декабря 2022 г.; дата принятия к печати 28 февраля 2023 г. Relevance. Inflation inertia refers to the persistence of inflation over time and can be caused by a variety of factors, including expectations about future inflation, the structure of the economy, and the behavior of economic agents. Over the past two decades, the European economy has grappled with a range of challenges and currently seeks to mitigate the negative impacts of the global pandemic. Research objective. Persistent inflation can lead to uncertainty, decreased investment, and a loss of confidence in an economy. Non-eurozone economies can also face challenges in controlling inflation due to such factors as the lack of monetary integration with the eurozone, limited access to the European Central Bank’s resources, and the lack of a unified currency. Hence, for a more effective monetary policy in these countries, it is necessary to measure and understand the inflation inertia. This paper offers a novel empirical study of the dynamics of inflation inertia for seven EU economies that are not part of the eurozone. Data and methods. To achieve the research objective, three non-linear unit root tests are employed to consider both structural changes and regime switching. These tests allowed for the inclusion of almost all non-linear dynamics observed in the inflation series. In addition, the tests involve the use of the dynamic rolling windows sample approach in order to provide more sensitive measurements of the effect of time-varying shocks on inflation inertia. Results. According to the static sample analysis of 200 observations, Bulgaria, Croatia, and the Czech Republic have inflation inertia. Sweden, Romania, Hungary, and Poland do not have inflation inertia when non-linear regime switching dynamics and structural change are considered. However, Croatia and the Czech Republic show a mostly non-stationary inflation in dynamic rolling windows sampling. Hungary has persistent inflation even though it was not detected in the static sample analysis. The shocks of inflation fade out in Bulgaria, Poland, Romania, and Sweden with non-linear dynamics. If non-linear dynamics is ignored, it can lead to misleading results in economic time series. Conclusions. Inflation inertia can be influenced by a variety of factors, including the global pandemic, global or regional conflicts and monetary policy preferences. The successful management of inflation inertia in Romania and Sweden may serve as a model for other economies that have demonstrated an ability to effectively address and mitigate the challenges posed by inflation inertia. Актуальность. Инерция инфляции относится к постоянству инфляции во времени и может быть вызвана различными факторами, включая ожидания будущей инфляции, структуру экономики и поведение экономических агентов. За последние два десятилетия европейская экономика сталкивалась с рядом вызовов и в настоящее время ищет способы смягчить негативные последствия глобального пандемического кризиса. Цель исследования. Постоянная инфляция может привести к неопределенности, уменьшению инвестиций и утрате доверия к экономике. Экономики, не входящие в зону евро, также могут столкнуться с проблемами в контроле инфляции из-за таких факторов, как отсутствие монетарной интеграции с зоной евро, ограниченный доступ к ресурсам Европейского центрального банка и отсутствие единой валюты. Поэтому измерение и понимание инерции инфляции является параметрической необходимостью для их валютных властей. Эта работа предлагает новый эмпирический исследование, чтобы понять динамику инерции инфляции для семи экономик в Европейском союзе, которые не являются частью зоны евро. Данные и методы. Чтобы достичь исследовательской цели, используются три нелинейных теста на единую ось, чтобы учитывать как структурные изменения, так и переключение режимов. Эти тесты позволяют включать почти все нелинейные динамики, наблюдаемые в сериях инфляции. Кроме того, тесты используются с подходом Rolling Windows Sample, чтобы предоставить более чувствительные измерения временных шоков на инерцию инфляции. Результаты. Болгария, Хорватия и Чехия имеют инфляционную инерцию согласно статической выборке из 200 наблюдений. Швеция, Румыния, Венгрия и Польша не имеют инфляционной инерции, когда учитываются нелинейная динамика смены режимов и структурные изменения. Однако Хорватия и Чехия показывают в основном нестационарную инфляцию в динамической выборке скользящих окон. Венгрия показывает устойчивую инфляцию, хотя она не обнаруживается в анализе статической выборки. Шоки инфляции затухают в Болгарии, Польше, Румынии и Швеции с нелинейной динамикой. Игнорирование нелинейной динамики может привести к ошибочным результатам в экономических временных рядах. Выводы. Наличие инерции инфляции может быть подвержено влиянию различных факторов, включая глобальную пандемию, глобальные или региональные конфликты и предпочтения монетарной политики. Успешное управление инерцией инфляции в Румынии и Швеции может служить моделью для других экономик, которые проявили способность эффективно адресовать и смягчать вызовы, вызванные инерцией инфляции. 现实性：通货膨胀惯性是指通胀随着时间的推移而持续存在。这可由各 种因素造成，包括对未来通货膨胀的预期、经济结构和经济主体的行 为。欧洲经济在过去20年中面临着一些挑战，目前正在寻找方法来减轻 全球疫情危机的负面影响。 研究目标：持续的通货膨胀会导致不确定性、投资减少和对经济失去信 心。欧元区以外的经济体也可能因与欧元区缺乏货币一体化、获得欧洲 央行资源的机会有限以及没有单一货币等因素而在控制通胀方面面临问 题。因此，衡量和了解通货膨胀的惯性对当局来说是货币参数化的必要 条件。本文提出了一项新实证研究，以研究不属于欧元区的七个欧盟经 济体的通货膨胀惯性动态。 数据与方法：为了实现研究目标，文章使用三个非线性单轴测试来解释 结构的变化和模式切换。这些测试允许纳入通胀系列中观察到的几乎所 有非线性动态。此外，在模型中，测试与Rolling Windows Sample一起 使用，来直观显示临时冲击对通货膨胀惯性的影响。研究结果：根据200个观测值的静态样本研究，证明保加利亚、克罗地亚 和捷克共和国有通货膨胀惯性。瑞典、罗马尼亚、匈牙利和波兰在文章 所考虑的非线性制度和结构变化下没有通货膨胀惯性。然而，克罗地亚 和捷克共和国在动态滑动窗口样本中显示为非平稳通货膨胀。匈牙利显 示出稳定的通货膨胀，尽管在静态样本分析中无法发现。保加利亚、波 兰、罗马尼亚和瑞典的通胀冲击正在以非线性动力学方式消退。文章忽 略了非线性动力学会导致经济时间序列的结果错误。 结论：通胀惯性的存在可能受到多种因素的影响，包括全球疫情、全球 或地区冲突以及货币政策偏好。罗马尼亚和瑞典对通货膨胀惯性的成功 管理可以成为其他经济体的典范，这两个国家显示出了有效处理和减轻 通货膨胀惯性压力的能力。

Relevance. Inflation inertia refers to the persistence of inflation over time and can be caused by a variety of factors, including expectations about future inflation, the structure of the economy, and the behavior of economic agents. Over the past two decades, the European economy has grappled with a range of challenges and currently seeks to mitigate the negative impacts of the global pandemic. Research objective. Persistent inflation can lead to uncertainty, decreased investment, and a loss of confidence in an economy. Non-eurozone economies can also face challenges in controlling inflation due to such factors as the lack of monetary integration with the eurozone, limited access to the European Central Bank’s resources, and the lack of a unified currency. Hence, for a more effective monetary policy in these countries, it is necessary to measure and understand the inflation inertia. This paper offers a novel empirical study of the dynamics of inflation inertia for seven EU economies that are not part of the eurozone. Data and methods. To achieve the research objective, three non-linear unit root tests are employed to consider both structural changes and regime switching. These tests allowed for the inclusion of almost all non-linear dynamics observed in the inflation series. In addition, the tests involve the use of the dynamic rolling windows sample approach in order to provide more sensitive measurements of the effect of time-varying shocks on inflation inertia. Results. According to the static sample analysis of 200 observations, Bulgaria, Croatia, and the Czech Republic have inflation inertia. Sweden, Romania, Hungary, and Poland do not have inflation inertia when non-linear regime switching dynamics and structural change are considered. However, Croatia and the Czech Republic show a mostly non-stationary inflation in dynamic rolling windows sampling. Hungary has persistent inflation even though it was not detected in the static sample analysis. The shocks of inflation fade out in Bulgaria, Poland, Romania, and Sweden with non-linear dynamics. If non-linear dynamics is ignored, it can lead to misleading results in economic time series. Conclusions. Inflation inertia can be influenced by a variety of factors, including the global pandemic, global or regional conflicts and monetary policy preferences. The successful management of inflation inertia in Romania and Sweden may serve as a model for other economies that have demonstrated an ability to effectively address and mitigate the challenges posed by inflation inertia.

The policy debate in Turkey over the impact of interest rate on inflation concerns the question of what policymakers should do when faced with volatile and high inflation. Motivated by this discussion, we provide an empirical analysis by connecting the cost channel to the Phillips relation. Our findings prove the existence of the cost channel. However, other determinants of inflation —labor share of income, prices of imported inputs, and consumption goods —dominate the cost channel in Turkey.

We analyze the inflation dynamics in Mexico during inflation targeting period by a GMM estimate of the Hybrid New Keynesian Phillips Curve in its open and closed economy versions. We update and discuss previous results and expand the capacity of this tool to analyze inflationary dynamics by incorporating the exchange rate on labor costs. We find: a) robust evidence of adaptive and rational expectations; b) incorporating the exchange rate improves the inflation fit; c) this version of the Phillips Curve has strengthened since Great Recession, and e) expectations formation process changes during inflationary episodes according to the origin of shocks, Analizamos la dinámica inflacionaria en México a partir de la adopción formal del Esquema de Objetivos de Inflación mediante la estimación de la Curva de Phillips Híbrida Neokeynesiana en sus versiones de economía abierta y cerrada utilizando el Método Generalizado de Momentos (GMM). Actualizamos y discutimos los resultados previos y expandimos la capacidad de esta herramienta para aproximar la dinámica de la inflación incorporando el tipo de cambio en los costos laborales. Nuestros principales hallazgos son: a) evidencia robusta de expectativas racionales y adaptativas; b) la incorporación del tipo de cambio mejora el ajuste de la inflación; c) esta versión de la Curva de Phillips se ha fortalecido desde la Gran Recesión; d) el proceso de formación de expectativas cambia durante episodios inflacionarios dependiendo del origen de los choques.

Master in Economics: Empirical Applications and Policies. Academic Year 2021-2022. In recent business cycles, U.S. inflation has experienced a reduction in inflation volatility, inflation persistence and, a severe weakening of the correlation with nominal interest (Gibson's paradox). This project concludes that the empirical evidence found in the U.S. extends to other OECD countries such as Canada, Australia, the UK and France characterized by having an independent central bank. Furthermore, we examine inflation dynamics in the U.S. with a 4-equation DSGE model augmented with money. Our model qualitatively reproduces the swings in inflation statistics, but lacks sources of nominal and real rigidity to fully capture the Gibson's paradox. In spite of these model ́s limitations, we find changes in price stickiness, the monetary policy rule, and the persistence of inflationary shocks as main explanatory factors of the Gibson paradox.

Central banks wish to avoid self-fulfilling fluctuations. Monetary rules with a unit response to real rates achieve this under the weakest possible assumptions about the behaviour of households and firms. They are robust to household heterogeneity, hand-to-mouth consumers, non-rational household/firm expectations, active fiscal policy, missing transversality conditions and to any form of intertemporal or nominal-real links. They are easy to employ in practice, using inflation protected bonds to infer real rates. With a time-varying inflation target, they can implement arbitrary inflation dynamics, including optimal policy. They work thanks to the key role played by the Fisher equation in monetary transmission.

The recent shift to remote work raised the amenity value of employment. As compensation adjusts to share the amenity-value gains with employers, wage-growth pressures moderate. We find empirical support for this mechanism in the wage-setting behavior of U.S. employers, and we develop novel survey data to quantify its force. Our data imply a cumulative wage-growth moderation of 2.0 percentage points over two years. This moderation offsets more than half the real-wage catchup effect that Blanchard (2022) highlights in his analysis of near- term inflation pressures. The amenity-values gains associated with the recent rise of remote work also lower labor's share of national income by 1.1 percentage points. In addition, the "unexpected compression" of wages since early 2020 (Autor and Dube, 2022) is partly explained by the same amenity-value effect, which operates differentially across the earnings distribution.

Gelişmekte olan ekonomilerin önündeki en önemli problemlerden biri artan ve artışı hareketi kalıcı olan enflasyondur. Enflasyon yapışkanlığı olarak adlandırılan bu durum iktisadi ajanların enflasyon beklentilerinde bozulma meydana getirmektedir. Fiyatlama davranışının da bozulmasına sebep olan enflasyon sürekliliği para otoritesinin politika alanını daraltarak iktisadi problemlerin çözümü önünde ciddi bir engel oluşturmaktadır. Sıradan bir gelişmekte olan ekonomiye göre çok daha fazla iç ve dış şoklara maruz kalan Türkiye için bu çalışmada üç doğrusal olmayan birim kök sınaması kullanılarak enflasyon yapışkanlığı incelenmiştir. Bu birim kök sınamalarından ikisi iktisadi zaman serilerinde gözlenen tek bir yapısal değişimi dikkate alıyorken, diğeri Fourier dalga fonksiyonundan faydalanarak birden fazla yapısal değişimi modellemektedir. Ocak 2002-Mart 2022 dönemini kapsayan bu çalışmada, doğrusal olmayan birim kök sınamalarının ayrıca Rolling Windows örnekleme yöntemi ile de kullanıldığı çalışmada Türkiye’nin son 10 yılında enflasyon yapışkanlığı yaşanan dönemler tespit edilmiştir. Analiz sonuçlarına göre tek bir yapısal değişimi dikkate alan birim kök sınamalarının Türkiye için işlevsiz kaldığı vurgulanmış, yapışkanlığın gözlendiği dönemler iktisadi çerçevede yorumlanmıştır., One of the most important problems in front of developing economies is inflation, which is increasing, and its increase is permanent. This condition, called inflation inertia, creates deterioration in the inflation expectations of economic agents. The continuity of inflation, which also causes pricing behavior to deteriorate, narrows the policy area of the monetary authority and creates a serious obstacle to solving economic problems. Inflation inertia is examined using three nonlinear unit root tests in this study for Turkey, which suffers much more internal and external shocks than any ordinary developing economy. While two of these unit root tests consider a single structural change observed in the economic time series, the other one models multiple structural changes using the Fourier wave function. The study covers the period of January 2002 - March 2022. This study which also uses the rolling windows sampling method detects inflation stickiness periods in the last 10 years. According to the results of the analysis, it is emphasized that unit root tests considering a single structural change remained dysfunctional for Turkey, and the periods in which inertia was observed are interpreted in the economic framework.

The objective of the study was to analyze whether the changes in money supply can account for variations in inflation dynamics in the presence of structural breaks by using data for the period 1970-2019. Zivot Andrews (one break) and Lee and Strazicich (two breaks) unit root tests were used to detect the structural shocks. To determine the long run relationship in the presence of structural shocks, Gregory & Hansen (1996) Cointegration test was used. Results show a robust long-run relationship between inflation, money supply, interest rate, and output. The empirical evidence show that monetary pressure has a significant role in the inflation dynamics of Pakistan, especially in the presence of structural shocks. As a policy measure, a tight monetary policy with increasing interest rates should help reduce the growth of money supply and moderate the inflation dynamics in Pakistan., Cilj studije bio je analizirati mogu li promjene u ponudi novca objasniti varijacije u dinamici inflacije uz prisutnost strukturnih lomova korištenjem podataka za razdoblje 1970.-2019. Zivot Andrews (jedan prekid) i Lee i Strazicich (dva prekida) testovi jediničnog korijena korišteni su za otkrivanje strukturnih šokova. Kako bi se odredio dugoročni odnos u prisutnosti strukturnih šokova, korišten je kointegracijski test Gregoryja i Hansena (1996). Rezultati pokazuju snažan dugoročni odnos između inflacije, ponude novca, kamatne stope i proizvodnje. Empirijski dokazi pokazuju da monetarni pritisak ima značajnu ulogu u dinamici inflacije u Pakistanu, posebno u prisutnosti strukturnih šokova.

Standard theory of consumer behavior stands on the maxim of utility maximization. Optimizing behavior of consumer is achieved by maximization of utility subject to budget constraint. An increase in inflation that is not accompanied by proportionate increase in income can leave a consumer worse off. Therefore, it is imperative for consumers to have right assessment about inflation which in turn requires appropriate modelling of inflationary behavior. This study assesses efficacies of different versions of new Keynesian Phillips curve for capturing dynamics of CPI inflation. Estimation of different formulations of this curve is achieved by employing generalized method of moments. This choice of estimation technique is made to handle potential problem of endogeneity. Countries with different resource and market structures are included to evaluate and compare fitness of different formulations for different economies. Economies of Pakistan and Turkey represent developing economies, economy of South-Korea is incorporated for emerging market economy and economies of Canada, UK and US are included for developed economies. The results of this study reveal that internal as well as external factors are crucial for explaining inflationary behavior of developing economies. Whereas, dynamics of domestic inflation for advanced economies are mostly explained by internal factors.

This study contributes to the literature on inflation dynamics by examining whether internal or external factors drive inflationary pressure in Nigeria. Using the annual time series data from 1981 to 2017 and applying Johansen cointegration analysis, the vector error correction mechanism and the impulse response function, the study reveals some compelling evidence to suggest that external forces are responsible for inflationary pressure in Nigeria. The results, amongst others, reveal that: external drivers– exchange rate, imported inflation and openness – induce a positive and direct relation to inflation. This is because a percentage change in these variables results in an increase in inflation of 0.49%, 0.47% and 4.28%, respectively, on average, ceteris paribus; the internal drivers – government expenditures, net food exports and lending interest rate – dampen inflation by 0.48%, 1.70% and 0.02%, respectively, on average, ceteris paribus; there is evidence of cointegration indicating that 57.48% of short-run errors will be corrected in the long run; imported inflation contributes to a deviation of about 33% deviation in the first five periods and accounts for cumulative average of over 100% deviation in inflation. Policy implications are discussed

Publiser's another name: JSPS Grants-in-Aid for Scientific Research (S) Central Bank Communication Design, JEL Classification: E31, D82, C72.

A stylized fact is that prices of goods tend to react and rise faster in response to an increase in costs of intermediate inputs, than they do when the costs of intermediate inputs decrease. This paper uses scanner data of retailers in an emerging economy, Kazakhstan, to analyze how large exchange rate shocks have an impact on consumer prices. We find, as in most of the literature, incomplete exchange rate pass through (ERPT) into consumer prices, even after 12 months of the initial shock. This ERPT, however, is heterogeneous and depends on the type of the product (imported versus domestic), the size of the shock, and the size of the retailer. In particular, ERPT is higher for imported products (50%) than for domestic products (25%); ERPT is also non-linear and higher for large retailers. Distinguishing the impacts of appreciation and depreciation reveals that ERPT is asymmetric and the direction of asymmetry is the opposite between imported and domestic products. This finding suggests that domestic producers may be keen on preserving the market share while foreign manufacturers may be more concerned with increasing markup. ispartof: VIVES Discussion Paper status: published

The primary purpose of this thesis was to investigate if the modern Phillips Curve is valid for ASEAN five (Indonesia, Malaysia, Thailand, Singapore and Philippines) countries using a time-varying approach in the form of an ARMA-GARCH model. The method enables us to investigate how the inflation volatility reacts to economic shocks and if its history can predict the conditional variance of inflation. This study also aimed to investigate whether financial liberalisation affects the conditional variance of inflation. Moreover, we introduce a new parameter into the Phillips Curve. We propose the inclusion of a globally decomposed financial spillover index to see how it affects the inflation dynamics. Examining the period between 1996-2020, using monthly data. We find weak results, and the Phillips Curve was only valid for Singapore. Our findings also suggest that the inflation volatility is highly time-varying, indicating the suitability of the ARMA-GARCH framework. Significant coefficients in the model allow forecasting the conditional variance of inflation. The results support the idea that financial liberalisation to be volatility augmenting in some countries, suggesting a negative relationship between the degree of financial integration and received spillover effects. The globally decomposed spillover indices demonstrated weak results. For further investigations, we, therefore, propose the usage of regionally decomposed spillover indices.

Policymakers and researchers see inflation characterized by cyclical fluctuations driven by changes in resource utilization and temporary shocks, around a trend influenced by inflation expectations. We study the in-sample inflation dynamics and forecast inflation out-of-sample by analyzing a New Keynesian Phillips Curve (NKPC) in the frequency domain. In-sample, while inflation expectations dominate medium-to-long-run cycles, energy prices dominate short cycles and business-to-medium cycles once expectations became anchored. While statistically significant, unemployment is not economically relevant for any cycle. Out-of-sample, forecasts from a low-frequency NKPC significantly outperform several benchmark models. The long-run component of unemployment is key for such remarkable forecasting performance.