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We investigate the evolution of the impact of monetary policy (MP) shocks in Peru in 1996Q1-2018Q2 using a set of time-varying parameter VAR models with stochastic volatility (TVP-VAR-SV), as proposed by Chan and Eisenstat (2018). The main results are: (i) the volatility of MP shocks falls during the Inflation Targeting (IT) regime; (ii) a contractionary MP shock decreases both GDP growth and inflation within a five quarters time span; (iii) the interest rate reacts faster to aggregate supply shocks than to both aggregate demand shocks and exchange rate shocks; (iv) under the pre-IT regime, MP shocks explain 20%, 10%, and 85% of the uncertainty in GDP growth, inflation, and the interest rate, respectively; and under the IT regime, all these percentages shrink to 1%–2%. The sensitivity analysis confirms the robustness of the main results. In general, the results show that MP has contributed to diminishing macroeconomic volatility in Peru. • Evolving impacts of monetary policy shocks on macroeconomic fluctuations in Peru. • Use of a set of TVP-VAR-SV models with Bayesian estimation. • Presence of two regimes: Pre-IT and Post-IT. • Volatility of MP shocks falls from 4% to 0.3% on average during the IT regime. • Interest rate reacts faster to AS shocks than to AD shocks and exchange rate shocks. [ABSTRACT FROM AUTHOR]

Purpose: The article aims to establish whether the degree of aversion to inflation and the responsiveness to deviations from potential output have changed over time. Design/methodology/approach: This paper assesses time variation in monetary policy rules by applying a time-varying parameter generalised methods of moments (TVP-GMM) framework. Findings: Using monthly data until December 2022 for five inflation targeting countries (the UK, Canada, Australia, New Zealand, Sweden) and five countries with alternative monetary regimes (the US, Japan, Denmark, the Euro Area, Switzerland), we find that monetary policy has become more averse to inflation and more responsive to the output gap in both sets of countries over time. In particular, there has been a clear shift in inflation targeting countries towards a more hawkish stance on inflation since the adoption of this regime and a greater response to both inflation and the output gap in most countries after the global financial crisis, which indicates a stronger reliance on monetary rules to stabilise the economy in recent years. It also appears that inflation targeting countries pay greater attention to the exchange rate pass-through channel when setting interest rates. Finally, monetary surprises do not seem to be an important determinant of the evolution over time of the Taylor rule parameters, which suggests a high degree of monetary policy transparency in the countries under examination. Originality/value: It provides new evidence on changes over time in monetary policy rules. [ABSTRACT FROM AUTHOR]

In this study, we discuss central bank communication sentiments assessed using different dictionaries. Policy communication by monetary authorities is considered an essential additional policy tool. Various text-mining techniques could evaluate its sentiment. Dictionary methods are a prominent example here because they offer simplicity and are a starting point for applying more elaborate methods. We decided to test four lexicons: generic, economic and financial and two domain-specific lexicons to conclude on their applicability to assess the sentiments of monetary releases and provide recommendations for their further application. This study surveys four lexicons qualitatively and conducts a few exercises: lexicon content comparison, performance tests for highly positive and negative messages, and statistical tests of dictionary alignment and correlation. The sample covers small open economies implementing inflation targeting. The study concludes that all investigated dictionaries could be used for detecting central bank intentions: they do not return contradictory results. The choice among them for a particular study depends on the study's setup and goals—as presented in our recommendations [ABSTRACT FROM AUTHOR]

ABSTRACT This study analyses and compares the determinants of inflation expectations among households and professional forecasters in India. To this end, we utilize quarterly survey data from the Reserve Bank of India (RBI), specifically the Inflation Expectations Survey of Households (IESH) and the Professional Forecasters’ Survey (SPF). The analysis employs a non‐recursive structural vector autoregressive (SVAR) model to explore the relationships between variables. The impulse response function and variance decomposition analysis shed light on the response of inflation expectations to macroeconomic shocks. Our findings indicate that apart from conventional macroeconomic factors like realized inflation and monetary policy, exogenous factors such as oil prices significantly shape inflation expectations. Comparing IESH and SPF, we found out that household expectations are more sensitive to shocks related to food prices, reflecting the influence of food expenses on household decision‐making. Conversely, professional forecasters’ expectations are more influenced by core inflation. Finally, we observed that inflation expectations adjust more quickly than realized inflation in response to macroeconomic shocks, suggesting a leading role. This study is novel with the contribution to the existing literature as it provides a comparative analysis of determinants of inflation expectations between households and professional forecasters in India, while also considering inflation targeting as a significant factor. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to examine the role of fiscal discipline on the dynamics of exchange rate pass-through during inflation targeting. The present study analyses the Turkish economy for the period 2006–2022 by the use of threshold regression models. Our results suggest that fiscal discipline, measured by the IMF-defined primary budget balance as a share of GDP (which excludes the one-off government revenues balance such as privatization, interest earnings, and real estate sales) has a significant role in inflation dynamics. The degree of exchange rate pass-through is significantly lower and thus raises the effectiveness of inflation targeting when the government ensues strict fiscal discipline. [ABSTRACT FROM AUTHOR]

This study aims to study the effectiveness of monetary policy and the extent of its success in targeting inflation as the latter is an economic problem faced by the world and developed countries, especially developing countries, considering inflation as one of the economic indicators that show the economic situation and situation of each country. The study concluded that giving independenceto the central bank will enhance the activation of quantitative monetary policy tools, especially in order to control the development of inflation rates and the money supply at an acceptable level. [ABSTRACT FROM AUTHOR]

Central banks set the nominal interest rate to target inflation and stabilize output. In monetary models, monetary policy affects output directly via the wealth effect. I show that in these models, the response of the central bank to fluctuations in output may induce real indeterminacy even if the Taylor principle is satisfied. I find that the determinacy conditions depend on the interest elasticity of output and generally, the Taylor principle is neither necessary nor sufficient for determinacy. This is in stark contrast with the New Keynesian model where a sufficiently strong policy response to inflation or output usually ensures determinacy. [ABSTRACT FROM AUTHOR]

Copyright of International Journal of Disciplines Economics & Administrative Scienves Studies is the property of International Journal of Disciplines in Economics & Administrative Sciences Studies and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The article "World Economic Prospects Monthly | Global" examines the impact of heightened tensions in the Middle East on global growth forecasts. The US has seen positive data surprises, leading to an increase in GDP growth forecasts, while China's economic slowdown has prompted bold policy support with uncertain effectiveness. The oil price surge from Middle East tensions poses short-term risks, but the long-term outlook remains stable. The text also delves into economic forecasts for various regions, including the Eurozone, Japan, the UK, Emerging Markets, India, Latin America, Central Eastern Europe, and Romania, highlighting key changes and policy outlooks. [Extracted from the article]

We propose a stochastic learning rule through an Agent-based model to understand how emerging market economies (EMEs) can achieve high levels of investment, given the announced inflation target rate. The central banks act as a pseudo-player, choosing between the pursued target inflation rate or a negative inflation rate. By taking this action as given, bounded-rational firms and workers iteratively play a two-population well-mixed evolutionary game to make investment decisions. Our findings show that when inflation converges to its target, the less the central planners' effort to reach a steady state with investment coordination. When central banks target a negative inflation rate, it can speed up the EMEs' convergence to a steady-state with agents coordinating their investment strategies. It shed some light on central banks' transparency and credibility to avoid the so-called debt-deflation spiral, which typically increases the uncertainty in EMEs, limiting the investments in the economy. [ABSTRACT FROM AUTHOR]

This article examines the impact of opacity in announcing the central bank's inflation target on macroeconomic volatility and welfare, considering the interaction between an independent central bank and a fiscal authority. Our findings suggest that a key factor influencing the effects of central bank transparency is the relative importance placed by the central bank, compared to the government, on output stabilization versus inflation stabilization. Specifically, when output stabilization is relatively more important for the central bank than for the government, full opacity may benefit the central bank, but not necessarily society as a whole. [ABSTRACT FROM AUTHOR]

We provide a measure of the credibility of the monetary policy of India after implementation of the Flexible Inflation Targeting (FIT) framework and attempt to deduce, if inflation expectations are anchored in India. The methodology involves (a) construction of a credibility index for the period 2012 to 2022 using annual data and (b) estimation of a time-varying implicit credibility index using a time-varying regression model, for the period 2014 to 2022 using quarterly data. It is evident from both the measures that there has been a gradual rise in the credibility after implementation of the FIT framework and that credibility is sensitive to unexpected external shocks. The empirical results derived from the implicit credibility index enable us to conclude that the inflation expectations of households and professional forecasters have been anchored after implementation of FIT in India. The robustness of the empirical results is evident as similar conclusions could be drawn when ordinary least square (OLS) estimation was used instead of the time-varying regression model. Likewise, better anchoring of the short-term inflation expectations of the households and professional forecasters is evident as compared to the medium-term expectations. [ABSTRACT FROM AUTHOR]

Introduction The significance of inflation in the economic system and the production reduction or loss resulted from an anti-inflation policy as an integral part of inflation control policies, should never be underrated. It is critically important to study the sacrifice ratio and influencing factors which measure the accumulated losses in real production as a result of one percent permanent reduction in the inflation. It is considered as a criterion which makes it possible to somehow evaluate the effects of inflation control policies imposed by the central bank. Therefore, in the present research, the factors influencing the sacrifice ratio are identified by emphasizing the government debt in Iran and using seasonal data (1997-2021). Methodology In order to achieve the goal of the research, the following relationship is considered: SRt=β0+β1(DebtGdp)t+β2Opent+β3Speedt +β4Transt+β5Itt+εt (1) SRt : The sacrifice ratio is equal to the cumulative amount of the reaction of economic growth to the monetary shock, while the denominator only shows the final effect of the change in inflation as a result of a monetary shock. This ratio is calculated as follows: SR=S=0T∂yt+s∂εm1∂t+T∂εmt (2) Itt : Inflation targeting is defined as an optimal monetary policy. The optimal monetary policy is obtained by minimizing the social loss function according to the constraints of the monetary transmission mechanism. The inflation targeting policy is calculated as follows: πt*=πt+yt-y+et-et-1 (3) πt,πt* are inflation rate and target inflation rate respectively, (yt-y) is the deviation of the product from its potential level, et is the exchange rate (dollar price of the country's currency). (DebtGdp)t : The ratio of debt to GDP for governments shows their ability to repay their existing loans and repay the loans they will receive. Opent : The degree of trade openness is defined as the ratio of total exports and imports to GDP and reflects economic development and diversity. Speedt : The speed of deflation is equal to the ratio of the total amount of deflation to the length of time during which inflation has decreased. Transt : The instrument of monetary policy is more transparent, which can reveal the actions of the monetary policy maker better and faster to the public. The index defined for transparency was considered as the following relationship: TIBLt =110 -1INFibound-INFt if INFt =INFt* if INFilower-boundt Fiupper-boundif INFt ≥INFiupper-bound or INFt ≤INFilower-bound (4) INFi consumer price index, INFt* monthly inflation, INFibound time interval of inflation in each year, INFi* inflation was considered and calculated and the past transparency index. When transparency is high, this index is equal to one, and if inflation is very high and in other words, transparency is very low, the index above will be equal to zero. To achieve the goal of this research, the Smooth Transition Regression Model (STR) is used. Findings The results obtained from the estimation of the model indicate that (DebtGdp)t-1 is the transition variable of the sacrifice ratio function. So that when (DebtGdp)t-1 reaches the threshold of 0.817, the function of the sacrifice ratio enters the second limit regime. The results indicate that (DebtGdp)t and Opent in both regimes have a positive effect on the sacrifice ratio and this effect is strengthened in the second regime. In the second regime, the Speedt also had a positive effect on the sacrifice ratio. Also, Transt and Itt have had a negative effect on the sacrifice ratio in both regimes, but this effect has been strengthened in the second regime. Discussion and Conclusion In relation to the positive effect of (DebtGdp)t on the sacrifice ratio, it can be said that an increase in government debt increases the wealth of bond holders, provided that other wealth items are constant, so the price of long-term bonds increases. The total demand and price level increase at the same time. In this case, the supply of money, which is endogenous and a function of the demand and the amount of government debt, increases in accordance with the demand for money. In this case, the price level, which is the balancing factor of the future nominal value of discounted wealth and the nominal value of public debt, increases. Therefore, the cost of deflationary policies has increased and ultimately leads to an increase in the sacrifice ratio. Expansionary monetary policy can lead to excess demand in the economy and thus cause an increase in the general level of prices, and the pressure to increase prices can be reduced through imports and thus by changes in the balance of payments. In fact, trade openness may shift some of the inflationary pressure to the balance of payments, resulting in lower average increases in the general price level. The positive effect of increasing speed of reducing inflation, in the second regime has led to an increase in the sacrifice ratio. In general, the improvement in the transparency index will be effective in reducing the sacrifice ratio. In case of transparency in Central Bank data, it could be potentially considered as one of the key tools in the field of monetary policy management. In fact, the transparency of information will lead to an increase in the commitment of Central Bank in dealing with inflation. It could also control inflation and ultimately lead to a reduction in the cost of deflationary policies, and sacrifice ratio decrease. Inflation targeting by means of public announcement of official quantitative targets for the rate of inflation over one or more times horizons could be considered as a workable policy. By explicit declarations, low and stable inflation will be assumed as the main goal of monetary policy in the long run. Inflation targeting minimizes the motivation of Central Bank to show opportunistic behavior and this may increase the credibility of this regulatory institution in the loner term. Subsequently, the general public will adjust their inflation expectations in a fast state and therefore the costs of deflationary policies will decrease in return.

Australia, like many other countries, experienced an unexpected surge in inflation following the COVID‐19 pandemic. This has renewed interest in the Phillips curve because of its important implications for monetary policy. We estimate the price Phillips curve in the post‐inflation targeting period using the most recent state‐level data. Identification relies on variation in regional demand that policymakers do not aim to stabilize. After controlling for cost‐push shocks and equilibrium unemployment, we obtain a modest slope of the Phillips curve and, more importantly, we do not find any steepening of the Phillips curve in the post‐COVID period. Without correct identification, the post‐COVID Phillips curve would be steeper as documented for other countries including the United States. We also find that the slope gradually decreases with the level of unemployment. [ABSTRACT FROM AUTHOR]

The slope of the Phillips curve has been shown to be flatter in recent years, including in Australia. How does this impact the optimal targeting window for a central bank conducting an average inflation targeting policy? This article shows that, in the face of the flattening of the Phillips curve, it is desirable to increase the targeting window. Doing so would lead to lower inflation fluctuations and to a non‐trivial welfare gain. In a persistently higher‐than‐target inflation, high‐interest‐rate environment, this implies that the central bank should keep the nominal interest rate higher for longer. [ABSTRACT FROM AUTHOR]

We discuss how monetary policy in Sweden has evolved since 1973. We provide a chronology of the monetary policy regimes in place during the past fifty years and identify two main regimes, the pegged-but-adjustable exchange rate regime (1973–1992) and the inflation targeting regime (1993–2022). The Riksbank conducted strict inflation targeting in the years after 1993 to build credibility and shifted to flexible inflation targeting from 1999. During and after the global financial crisis, monetary policy dealt with challenges and instruments not originally viewed as part of the inflation targeting framework. We compare economic developments across time and countries. Inflation in Sweden has been more stable under the inflation targeting than previous regimes, while GDP growth was higher during the Bretton Woods System. Developments in Sweden have been similar to those of Denmark. We discuss recurrent themes in the monetary policy debate under inflation targeting. How to define the inflation target? What is the relative importance of demand/supply shocks? What are the implications for monetary policy of financial instability and exchange rate variability? We conclude that the most significant and positive effect of central bank independence in Sweden is the remarkable stability of medium-term inflation expectations. [ABSTRACT FROM AUTHOR]

This special issue of Comparative Economic Studies, commemorating fifty years since the end of the Bretton Woods system, examines the adjustment of small open economies to floating exchange rates and new monetary policy frameworks. Based on a workshop held at the KOF Swiss Economic Institute in June 2023, six papers analyse dimensions such as the evolution of monetary policy regimes, the impact of economic crises and the use of unconventional monetary policies in Canada, Israel, Norway, Sweden and Switzerland. The findings highlight the benefits and limitations of inflation targeting, the challenges of global financial integration and the strategic responses of central banks to maintain stability and independence, providing policymakers with valuable insights into the complex dynamics of monetary policy in the post-Bretton Woods era. [ABSTRACT FROM AUTHOR]

After centuries of metallic monies, for a long time, our understanding of fiat money had remained rudimentary and often controversial. Successive regimes eventually failed. The end of the Bretton Woods system marked the moment when the link between fiat money and gold was severed and when the possibility of letting exchange rates float became possible. The small open economies adopted various arrangements. Informed by these experiments, the understanding of monetary policy substantially progressed, leading to the widespread adoption of the expected inflation-targeting strategy with similar inflation targets. As a result, exchange rate variability has declined. The US dollar dominance was maintained and even increased. Yet, new challenges have emerged. The long period of interest rates stuck at the effective bound effectively suspended the use of the strategy. Then, during the post-pandemic surge in inflation rates, inflation forecasts became highly imprecise. [ABSTRACT FROM AUTHOR]

Copyright of Hacettepe University Journal of Economics & Administrative Sciences / Hacettepe Üniversitesi Iktisadi ve Idari Bilimler Fakültesi Dergisi is the property of Hacettepe University, Faculty of Economic & Administrative Sciences and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

One of the most widely researched macroeconomic relationships is money demand stability, which helps monetary authorities understand what motivates economic agents hold real money balances and whether it can predict inflation. However, endogenous structural shocks to macroeconomic fundamentals have often been criticized for distorting the equilibrium relationship among economic variables. These shocks usually stem from socioeconomic and political changes, behavior of economic agents, and random shocks. We examine the presence of cointegrating relationships between money demand and scale and opportunity cost variables while allowing for multiple endogenous structural breaks in the cointegrating vectors in the Indian context for the period 1996:Q2–2021:Q2. We utilize the Narayan and Popp (J Appl Stat 37(9):1425–1438, 2010) test to identify the break dates in each series and then employ the Maki (Econ Model 29(5):2011–2015, 2012) cointegration approach to establish the presence of long-run relationships between money demand and its covariates. Our study finds the presence of stable long-run relationships in the money demand function, implying that monetary authorities may target narrow and broad monetary aggregates as an indicator or treat them as an information variable to anchor the inflation expectations of economic agents under the current flexible inflation-targeting framework. [ABSTRACT FROM AUTHOR]

AbstractThis article provides direct evidence of the role of housing in central banks’ monetary policy decisions through the examination of the minutes of the Reserve Bank of Australia Board (RBA) and the UK’s Monetary Policy Committee (MPC). It focuses on three periods when economic shocks necessitated monetary policy activism: the Global Financial Crisis, the Covid-19 pandemic and the subsequent inflationary resurgence. It enhances understanding of the monetary transmission mechanism by identifying the role of lender behaviour which contributed to the adoption of Quantitative Easing by the MPC; and of the ‘leaning against the wind’ debate by revealing the RBA’s view on rising house prices as a bulwark against mortgage default and financial instability. However, it also reveals these central banks’ underdeveloped understanding of the role of rental housing, and challenges the fragmentation of fiscal and monetary policy between elected governments and independent central banks. [ABSTRACT FROM AUTHOR]

In this article, I analyse the case of 'modern' central banking's dual failures in effectively containing financial fragilities and inflationary pressures as a cautionary tale about the intrinsic limitations and contradictions of 'governing through quantified futures'. I construct a genealogy of central banks' much-vaunted 'performative art' of governing the economy through the management of expectations in order to reveal a crucial tension between the control of expectations about the future and controlling the future through (present) expectations of it. I argue that social scientific analyses tend to operate with a truncated understanding of performativity that prevents them from developing sufficiently precise and discerning accounts of the mechanics of performative processes to reveal their (intrinsic) limitations and explain how and why they (may) fail. By dissecting the surprisingly complex mechanics of central banks' performative agency, I thus contribute towards a more precise theorisation of how governing through quantified futures operates. [ABSTRACT FROM AUTHOR]

This paper investigates how the commitment to maintain an established inflation target as opposed to changing it depends on the extent to which institutional or economic preconditions improve in a country. For 19 inflation‐targeting countries, we show that stronger operational commitment to the preannounced target is pronounced in countries with a greater improvement in institutional or economic preconditions, such as central bank independence, inflation, government indebtedness, financial development and central bank credibility. Our results also highlight the heterogeneous contingencies for the discretionary behaviour of adjusting the target, including the gradual disinflation phase, fiscal dominance and the transition to flexible targeting. [ABSTRACT FROM AUTHOR]

The Comprehensive Monetary Policy Framework (CMPF) project, which considers de jure and de facto, domestic (money, inflation) and external (exchange rate), monetary policy targets, has now classified 186 countries/currency areas from 1974 to 2017. This means that it is now possible to track the evolution of monetary policy frameworks across the world and its regions. This paper outlines the methodology of the classification and analyses the trends at global, regional and sub-regional levels. [ABSTRACT FROM AUTHOR]

This document is a correction to an article by Salvatore Nisticò, addressing an error in the welfare criterion derivation. The error does not affect the theoretical results, and updated numerical results and sensitivity analysis are provided. The document explains the two layers of heterogeneity in the model and discusses the welfare effects of cross-sectional dispersion. It also provides a corrigendum for equations in a previous paper by the same author. The numerical analysis shows that the revised welfare criterion has a marginal effect and strengthens the insights of the paper. The document evaluates different policy regimes and their implications in terms of cyclical and welfare properties, highlighting the importance of considering financial-wealth effects in monetary policy design. The results demonstrate that ignoring financial instability leads to higher welfare losses, and the total welfare costs of ignoring financial-wealth effects are substantial. The sensitivity analysis confirms these findings. [Extracted from the article]

We seek to investigate the effects of communication by central banks on professional and consumer inflation expectations. Accordingly, we investigate 12 small open economies implementing inflation targeting. The communication tone of the central banks is determined based on their post‐decision releases. We use computational linguistics to quantify this factor. With regard to two subsamples that are identified based on the central bank's experience in inflation targeting, we estimate panel models while controlling for other prospective drivers of expectations. The communication tone of a central bank significantly affects the expectations of professional forecasters from economies with more experience in inflation targeting. [ABSTRACT FROM AUTHOR]

Purpose: The perception of Islamic finance by its various stakeholders is not always reconcilable. Its foundations and attributes are subject to a plurality of perceptions making it almost impossible to reach a consensus about them. This paper aims to understand the perception of Islamic finance by bank employees in Cameroon. Design/methodology/approach: This research follows the interpretativist paradigm and is qualitative and exploratory in nature. The data are collected through semi-structured face-to-face interviews with bank employees, mainly branch managers. These interview data are analysed using the thematic analysis method. Findings: Bank employees in Cameroon perceive Islamic finance as a finance that: targets everyone, regardless of religion, but Muslims first (Islamic finance is both inclusive and exclusive); offers original products and services; has a religious anchor that may hinder non-Muslim economic agents; has many advantages, mainly for financial institutions, and some limitations for financial institutions and their customers; is full of opportunities for its stakeholders; and is not yet fully practiced in Cameroon. Originality/value: This study mobilises a qualitative approach, provides new insights into the research on the perception of Islamic finance and reaches a consensus on the perception of certain aspects and attributes of Islamic finance, namely, for the perception of the target and the Shariah compliance of Islamic finance. Furthermore, this study is a pioneering effort to understand bank employees' perception of Islamic finance in non-Islamic and developing countries where Islamic finance is underdeveloped. [ABSTRACT FROM AUTHOR]

The paper compares the economic performance of countries that apply the monetary regime of inflation targeting (IT) and countries that apply alternative monetary regimes in the CESEE (Central, Eastern, and Southeastern Europe) region. The paper aims to assess whether the IT monetary regime has contributed to greater positive effects on economic performance in the group of countries that use inflation targeting as a monetary strategy compared to other groups of countries with alternative monetary strategies. The methodology of comparison was applied, namely the statistical technique Difference in Difference (DID), according to Ball and Sheridan (2005) and Goncalves and Salles (2008). After the introduction of IT, there was a fall in inflation rates (but the significance of IT is artificial) and a reduction in the volatility of inflation and gross domestic product (GDP), leading to a stabilisation of economic growth. The results of the analysis indicate that during the period of analysis (1990–2020), there was an improvement in economic performance after the introduction of inflation targeting in the group of countries that use that monetary strategy, but also in other groups of countries. However, the results show that economic performance is a little better in the group of countries that applied inflation targeting as a monetary regime. [ABSTRACT FROM AUTHOR]

This paper investigates the effects of the Brazilian Central Bank (BCB) credibility on the outcomes of its monetary policy. In this sense, we seek to characterize periods in which the central bank can be categorized as strong (high credibility) or weak (low credibility) through a VAR methodology with an endogenously estimated threshold parameter. The econometric model includes the credibility variable, which defines the regimes, along with the output gap, inflation, 12 months ahead inflation expectations, the policy interest rate, and a long-term interest rate. Our dataset spans from 2003 to 2022, with monthly data. The estimations suggest a significant threshold parameter at 1%, with a value of 1.75 percentage points. Thus, we highlight that the BCB operates in a low credibility regime when inflation expectations exceed the tolerance bands around the inflation target. In fact, this occurred in 19% of the considered sample, equivalent to 46 months. Despite the relatively low frequency of periods in which the Brazilian Central Bank operated in a low credibility context, such a regime should be diligently avoided, as our evidence demonstrates that this regime is associated with a substantial reduction in the effectiveness of monetary policy in the country. We show, for example, that with low credibility, the BCB practically loses the ability to affect productive activity and the dynamics of prices (inflation and inflation expectations). When examining the possible causes of the reduction in the effectiveness of monetary policy conditional on the credibility regimes, we show that this variable can affect the existing trade-off between output and inflation in the economy. In other words, our results suggest that credibility regimes can influence the observed inclinations in the country's Phillips curve. Specifically, we point out that in a low credibility regime, inflation shocks generate recessionary effects on output, and inflation becomes more responsive to increases in inflation expectations, thereby reducing the degree of price rigidity. In conclusion, monetary policy in Brazil has effects that systematically depend on the credibility regime in operation. Therefore, maintaining a high credibility regime should remain a priority for the BCB, as it facilitates the achievement of favorable outcomes, including meeting inflation targets. [ABSTRACT FROM AUTHOR]

Copyright of Mexican Journal of Economics & Finance / Revista Mexicana de Economia y Finanzas is the property of Instituto Mexicano de Ejecutivos de Finanzas and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This article provides an overview of the macroeconomic challenges facing the 10 countries in the Association of Southeast Asian Nations (ASEAN). It discusses various macroeconomic indicators and the importance of achieving high levels of economic growth. The article also explores ASEAN's participation in Regional Value Chains (RVCs) and Global Value Chains (GVCs), particularly in the automotive and electronics industries. It examines the adoption of inflation targeting frameworks by ASEAN countries and evaluates their macroeconomic performance. The text further analyzes the fiscal sustainability of Indonesia, Malaysia, and Thailand, providing policy recommendations to enhance revenue collection and reduce subsidies. It also discusses the challenges faced by Vietnam's economy and suggests policy measures to overcome them. The article touches on economic issues in Cambodia and Laos, including technology spillovers, Central Bank Digital Currency (CBDC) implementation, and financial system reform. The perspectives presented offer insights into these countries' economic situations and potential policy measures. [Extracted from the article]

The experience of flexible inflation targeting in ASEAN‐5 has been favorable. The present paper shows improvements in macroeconomic outcomes consistent with the framework's mandated objectives: lower levels and volatility of inflation, more stable economic growth, and a well‐functioning financial system. Using difference‐in‐difference approaches, we find that, for ASEAN‐5 and developing countries, the inflation targeting framework mainly benefits adopters in terms of reducing inflation levels. In response to the challenges emanating from capital flow volatility and domestic financial imbalances, over the past 20 years, ASEAN‐5 policy frameworks have continuously evolved to incorporate various policy tools. These include, among others, foreign exchange intervention, macroprudential policy, and capital flow measures. A multitude of policy tools is arguably one of the key factors contributing to sound macroeconomic outcomes during the post‐targeting periods. [ABSTRACT FROM AUTHOR]

Copyright of Strategic Issues of Northern Hungary ECONOMY-REGION-SOCIETY / Észak-magyarországi Stratégiai Füzetek GAZDASAG-REGIO-TARSADALOM is the property of University of Miskolc, Faculty of Economics and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The article discusses the outlook for central banks and their potential policy rate cuts. The author believes that major central banks, such as the European Central Bank and the Federal Reserve, will cut rates more quickly than what is currently expected by markets. The article also highlights the factors that central banks are considering, such as global GDP growth forecasts, inflationary pressures, and the path of services inflation. The author predicts that the ECB will cut rates by a further 200bps by the end of 2025, while the Fed and Bank of England will cut by 150bps over the same period. However, the author notes that there are risks to the path for policy rates, and that markets may be underestimating the extent of policy divergence between the Fed and ECB. [Extracted from the article]

This study proposes an 'implicit measure' of disagreement to investigate presence of any latent discord in the policy briefings of central banks across nations. We analyse Monetary policy statements of the Bank of Japan (Japan), Banco Central do Brasil (Brazil) and Central Bank of the Republic of Turkey (Türkiye) on both specific as well as overall economic outlook by using novel text mining tools. Subsequently, we explore the relationship of the proposed measure of implicit disagreement with the accuracy of growth and inflation forecasts. Our findings confirm that disagreement/discord among policymakers over varied economic aspects provides signals to forecasters and helps in aligning their forecasts better. The results of this study indicate that disagreement too can be considered as a plausible criterion that can explain the forecaster's belief thereby playing a positive role in 'forecaster learning'. [ABSTRACT FROM AUTHOR]

We propose a new method to estimate the unobservable natural real rate of interest in the United States (US). We begin by describing the natural rate in the New Keynesian model and then theoretically linking its evolution to both demand and supply‐side shocks hitting the US economy. Our results indicate that the technology shock dominated the shift in the natural real rate of interest during the sample period 1947–2017. In addition, we also examine whether the Taylor rule should be augmented for changes in the estimated natural rate. Our maximum likelihood estimation shows that the inclusion of the natural interest rate shift in the Taylor rule leads to significant improvement of the interest rate modelling. [ABSTRACT FROM AUTHOR]

We examine the nexus between financial inclusion and inflation targeting monetary policy effectiveness in West African Economic and Monetary Union countries by employing a heterogenous panel approach that enables us to delineate the responses to policy innovations related to idiosyncratic country‐specific shocks, common shocks, and composite shocks. We find that these shocks significantly affect inflation and financial inclusion but with varying magnitudes, signs, time of responses, and persistence. We further demonstrate that inflation targeting monetary policy is differently associated with the various dimensions and indicators of financial inclusion. Overall financial inclusion shocks temporarily increase inflation; deposit shocks reduce inflation; and credit shocks increase inflation. Central bank policy rate differently responds across time horizon to overall financial inclusion shocks; and it increases due to credit shocks highlighting that the monetary authority responds to credit shocks by implementing contractionary monetary policy. Our results highlight that monetary policy aimed at promoting inclusive financial services and responses of monetary policy to financial inclusion should be specific to the dimensions of financial inclusion. [ABSTRACT FROM AUTHOR]

We analyze how trust affects the transmission of negative demand and supply shocks using a behavioral macroeconomic model. We define trust to have two dimensions: trust in the central bank's inflation target and trust in the central bank's capacity to stabilize the business cycle. We find, first, that when large negative shocks occur, the subsequent trajectories taken by output gap and inflation typically coalesce around a good and a bad trajectory. Second, these good and bad trajectories are correlated with movements in trust. In the bad trajectories, trust collapses, and in the good trajectories, it is not affected. This feature is stronger when a negative supply shock occurs than in the case of a negative demand shock. Third, initial conditions, in particular the initial state of inflation and output expectations, matter. Unfavorable initial expectations drive the economy into a bad trajectory, and favorable initial expectations produce good trajectories. Fourth, we analyze the sensitivity of our results with respect to the size of the shocks. Fifth, we derive implications of our results for our capacity of making forecasts about the effects of large demand and supply shocks. [ABSTRACT FROM AUTHOR]

The stability of money demand is central to South Africa’s monetary policy. Furthermore, it has implications on the work of the SARB which is the monetary authority of South Africa. Since year 2000, the SARB has been hawkish in its behaviour, which raises questions about stability of money demand. This is because for an inflation targeting economy that provides information to the public to stabilize the market, its money demand should be stable, thereby, making the behaviour of the central bank more stable. However, the behaviour of the SARB does not seem to portray that the demand for money in South Africa is stable. Hence, this study assesses the demand for money in order to comprehend its behaviour. The study uses CUSUM test to test for the stability of money demand. And it is found that before year 2015, money demand was stable. Hence, the money demand in South Africa is becoming unstable overtime. The sample data used in the study is from 2003 to 2023. [ABSTRACT FROM AUTHOR]

This paper empirically analyzes the key drivers of inflation in Kazakhstan by differentiating between demand and supply-driven factors contributing to headline inflation. Given that Kazakhstan is highly sensitive to adverse external fluctuations (due to its economic structure), our empirical strategy investigates asymmetric dynamics of prices of goods with high versus low degree of import share. Hence, we develop a methodology to determine the level of “importability” in certain consumption products, which serves as a proxy of vulnerability to external macroeconomic shocks. The results confirm our hypothesis that products with different degree of import content respond differently to major macroeconomic shocks. Consequently, we conclude that headline inflation in Kazakhstan is primarily impacted by supply-side factors, such as the direct transmission of exchange rate changes to prices of products with higher import shares (exchange rate pass-through) and a large component of inflation inertia. Differentiating and properly identifying inflation dynamics of the high-import-content and low-import-content goods have important implications for optimal monetary policy conduct in developing economies.

The article "Global: Middle East tensions add uncertainty to world growth" discusses how heightened tensions in the Middle East have increased downside risks to global growth forecasts, but the baseline forecast remains unchanged at 2.8% for 2025. The US has shown strong productivity growth, leading to an upward revision in the GDP growth forecast to 2.5% for 2025. China's recent data indicates a loss of momentum, prompting policy support from the People's Bank of China, but forecasts remain cautious. The oil price surge due to Middle East conflicts poses short-term risks, but the long-term outlook remains stable. [Extracted from the article]

We evaluate the cross-sectional predictive ability of a forward-looking monetary policy reaction function, or Taylor rule, in both statistical and economic terms. We find that investors require a premium for holding currency portfolios with high implied interest rates while currency portfolios with low implied rates offer negative currency excess returns. Our forward-looking Taylor rule signals are orthogonal to current nominal interest rates and disconnected from carry trade portfolios and other currency investment strategies. The profitability of the Taylor rule portfolio spread is mainly driven by inflation forecasts rather than the output gap and is robust to data snooping and a wide range of robustness checks. [ABSTRACT FROM AUTHOR]

The relevance of the study is due to the turbulent development of European economies, which directly affects the choice of monetary policy regime. This policy is characterised by quantitative easing (QE) in response to weak demand during a prolonged recession. Today, European central banks continue to use QE and short-term interest rates as additional instruments of conventional policy to curb inflation and stimulate economic growth. The purpose of the article is to analyse the monetary policy of quantitative easing (QE) and its impact on inflation dynamics in European countries. The research methodology includes a systematic method of cognition to determine the feasibility of using conventional and non-conventional monetary policy instruments to overcome monetary shocks of recession; an abstract and logical method to understand the monetary policy strategy of European central banks in the post-crisis period, based on short-term interest rate cuts under the inflation targeting regime; a statistical method to analyse the dynamics of inflation in national economies. Results. The article presents a retrospective analysis of the quantitative easing (QE) monetary policy and its impact on the inflationary processes of European countries in the medium term. The practical significance of the research results is to assess the consequences of the application of the monetary policy of quantitative easing (QE) in developed European countries and to analyse the deviations of central banks' inflation forecasts from its actual values. The originality of the article is due to the need to determine the prospects for the application of the monetary policy of quantitative easing (QE) and its impact on inflationary processes in the post-crisis period. Conclusions. Lower interest rates and increased public spending stimulate aggregate demand, which results in an unwinding of the inflationary spiral. The transition to inflation targeting and interest rate hikes rarely occurs in a neutral macroeconomic environment. In practice, especially in emerging economies, monetary policy tightening is often a reaction to external shocks. Crises of this type are accompanied by a sharp jump in devaluation, inflation, a decline in GDP, instability in the financial sector, and a slowdown in economic growth. Russia's full-scale invasion of Ukraine has had an impact on the economies of European countries. The uncertainty of the duration of the hostilities is holding back economic activity. Trade disruptions are leading to new shortages of materials and inputs. Rising energy and raw material prices are reducing supply and demand. The development of the European economy will crucially depend on how events in Ukraine develop, under the influence of external sanctions imposed by the aggressor country and possible further measures. At the same time, economic activity is still supported by the economic recovery from the crisis phase of the pandemic. Inflation increased significantly and remained high in 2023, mainly due to a sharp rise in energy prices. Inflationary pressures increased in many sectors of the economy.