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We analyze how individual investors respond to inflation. We introduce a unique data set containing information on local inflation and security portfolios of more than 2,000 clients of a German bank between 1920 and 1924, covering the German hyperinflation. We find that individual investors buy fewer (sell more) stocks when facing higher local inflation. This effect is more pronounced for less sophisticated investors. Moreover, we document a positive relation between local inflation and forgone returns following stock sales. Our findings are consistent with individual investors suffering from money illusion. Alternative explanations, such as consumption needs, are unlikely to drive our results. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online [ABSTRACT FROM AUTHOR]

AbstractThe rapid public debt decrease at the end of World War II is regularly analysed as being the result of inflationary policies initiated by governments. This policy is said to be based on economic thinking that is less virulent towards inflation than during the interwar period. This article seeks to question this view by presenting a relatively unknown debate among French economists. By highlighting out two confidential studies made by the Institut de conjoncture, it shows that a minority of French economists developed a framework in which the call for inflation to reduce debt is well founded. [ABSTRACT FROM AUTHOR]

Leading central banks did not anticipate the surge in inflation in 2021 and 2022. In our paper we assess whether changes in the velocity of money and monetary growth (broadly defined) explain long term inflation patterns in the US. We use a hundred-year sample to study the long term and the cyclical behaviour of money velocity. We find that changes in the velocity of money are short lived and revert to its mean. We also characterise the periods where changes in money velocity have kept closer to its mean as those of monetary equilibrium. We use a regime switching model to test for the impact of changes in the amount of money (broadly defined) and in money velocity in inflation over the medium and long term. Our model explains both the non-inflationary outcome of the Global Financial Crisis and the surge in inflation in the aftermath of the Covid-19 pandemic. [ABSTRACT FROM AUTHOR]

This paper investigates inflation dynamics in emerging markets. We apply a multi-country model (GVAR) and a time-varying Granger causality test (TVGC) to examine the drivers of inflation in Brazil, China, India, Indonesia, South Africa, and Türkiye over the period 1980Q1-2022Q4. The aim is to ascertain whether these drivers are locally or globally determined and vary over time. The GVAR model results indicate that local and global factors drive domestic inflation, collectively contributing to inflationary pressures in emerging countries. The TVGC results, on the other hand, provide strong evidence of the causality from local and global factors to domestic inflation. Local factors appear to have a stronger influence than global ones, suggesting that local dynamics play a more significant role in explaining inflation in these countries. Consequently, globalization and economic/trade integration, seen as tools to suppress inflation, can turn into factors that cause inflation in the face of a supply shock such as the one caused by the pandemic. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine the impact of COVID-19 on inflation in Indonesia. There are two questions in this study: (1) Is there an impact of COVID-19 on inflation in Indonesia? and (2) whether there are differences in the impact of COVID-19 on regional inflation in Indonesia, considering the different intensities associated with COVID-19. Design/methodology/approach: The estimation technique showing the impact of the COVID-19 pandemic on inflation uses the difference-in-differences (DID) method described by Pischke (2008). The core idea of the estimation above is continuous DID using panel data. No province was affected by COVID-19 before 2020:Q1. Once COVID-19 hits the economy, the effects vary from one district to the other. Findings: The authors find that the severity of the COVID-19 pandemic negatively affects inflation – the more severe the pandemic, the lower the inflation. This finding conforms with several studies suggesting higher demand pressures than supply during the pandemic. Compared with supply-side indicators such as production index, demand-side indicators – such as consumer confidence index and real sales index – fell more sharply. Research limitations/implications: In the Introduction section, the authors have added a discussion that indeed the COVID-19 pandemic affects inflation through both the demand- and supply-side shocks. While factors driving regional differences in inflation rate are important research and policy questions, the analysis of these factors is outside the scope of this study. The study focuses on the COVID-19 impact on inflation and whether the pandemic disproportionately affects some regions than the others. Practical implications: This research is important to provide an understanding of the nature of the pandemic on inflation in the context of the Indonesian economy, which is essential to policy formulation, especially for the Central Bank in carrying out the mandate to maintain rupiah stability. This issue is due to the implications of different policy responses between demand- and supply-side shocks. Originality/value: As a novelty in this study and research gap, the authors use a continuous DID method to account for the varying intensity of COVID-19 across the provinces. In particular, the authors use the number of positive cases of COVID-19 per 1,000 population as opposed to just a binary indicator of before-and-during COVID-19 across provinces. [ABSTRACT FROM AUTHOR]

We study inflation in a group of 15 countries before and during the classical Gold Standard using annual data spanning 1851–1913. The degree of co-movements between domestic and international inflation depends on geographical remoteness and openness to trade. Furthermore, international inflation acts as an 'attractor' for domestic inflation. Sub-sample estimates reveal little evidence of instability implying that international inflation was an important influence on domestic inflation throughout this time period. [ABSTRACT FROM AUTHOR]

The work is devoted to the modeling of the behavior of the tourism market in the conditions of a supply random lag, distributed according to normal and uniform distribution laws. The behavior of dependences on the tourist market of supply and demand on the price is considered. The modeling of the behavior of the tourism market was carried out using a market dynamic model in the plane of variables “supply – price – demand” taking into account the interests of different groups of consumers, primarily from the point of view of pricing. The delay between changes in supply and demand volumes is taken into account using a Cobweb model. To test this method, information was collected on family expenses when traveling abroad (outbound tourism, tourist vacations lasting 7-15 days) by surveying the employees of 38 travel organizations as of 2021. Three segments of the tourism market are identified: low ($2000 − 4000), medium ($4000 − 12000), and VIP-segment ($12,000 − 20,000). The analysis of the modeling results showed that the behavior of tourists of different segments can significantly influence the market dynamics. The use of a Cobweb model allowed for determining the level of stability of tourist behavior and assessing the possibility of consumer migration from one segment to another. Sensitivity to price changes and response to new offers from different segments can be different, which is important for determining pricing strategies, marketing, and the development of new tourism products.

The debates between demand-pull and cost-push theories of inflation have shaped stabilization programs since the 1923 German hyperinflation. This article combines elements from the modern revival of the Classical tradition of value and distribution and the Latin American Structuralist Approach to analyse the political economy behind Argentina's high-inflation regime and stabilization policies from 1983 to 1989. Our main hypothesis is that exchange rate dynamics play a crucial role in stabilizing distributive configurations and price dynamics in a small open economy with conflicting claims. High external debt, persistent devaluation expectations, and exchange rate policies imposed by international creditors to safeguard the economy's repayment capacity are identified as the primary causes behind the failure of stabilization attempts in Argentina during the late 1980s. [ABSTRACT FROM AUTHOR]

Based on a dynamic panel data model, this paper estimates the impact of lockdown policies on inflation with U.S. metropolitan-level data from the Bureau of Labor Statistics. After controlling for the unit/time fixed effects and several aggregate demand/supply shifters, lockdown policies created a mild inflationary effect nationwide, though the individual effect was heterogeneous. This study novelly analyzes the political economy of coronavirus disease policy and the subsequent economic outcomes. In particular, the inflationary impact was most pronounced for Republican-governed states that switched votes from President Trump in 2016 to President (elect) Biden in 2020, suggesting price stability is a source of voting behavior. On the contrary, lockdown policies caused deflation in Democratic-governed states where unemployment rates and public compliance with lockdown measures were presumably higher. The results indicate that the economic consequences of public policies depend critically on the political partisanship of the region. [ABSTRACT FROM AUTHOR]

During the 1990s and 2000s, many developing nations accepted fixed exchange rate regimes to sustain price stability. By pegging their currencies to an anchor currency (i.e. US dollar), developing countries could bring credibility and confidence into their economies. The study tries to analyse the impact of the pegged exchange rate regime on inflation in BRICS countries for the period spanning from 2003 to 2022. The result points to the loss of monetary policy autonomy due to the ‘impossible trinity’ coming into play with a steady increase in capital inflows. The country’s large trade surpluses and extensive trade relationships may buffer the impact of exchange rate fluctuations on domestic prices, as changes in the exchange rate may be absorbed by changes in trade volumes or pricing strategies. Other factors like demographic trends or government interventions in markets could overshadow the influence of the exchange rate regime on inflation. The impact of changes in the exchange rate regimes on inflation may operate with lags, meaning that any effects may not be immediately observable in the data. The analysis in this study proposes that exchange rate regimes choice and money supply influence the inflation dynamics in the BRICS countries. It merely reflects the success of the central bank in neutralizing its very effort of maintaining the pegged rate, which gives rise to inflationary growth of the money supply. [ABSTRACT FROM AUTHOR]

This study applies the PSM-DID approach to investigate whether the energy price has been impacted by the Russia-Ukraine war among OECD countries during 1999–2022. Compared with previous studies, we obtain robust and heterogeneous results by considering endogeneity from the perspective of quantitative policy assessment. It concludes the Russia-Ukraine war has significantly raised energy prices, leading to a 9% increase in energy prices in OECD countries. The heterogeneity results show that the Russia-Ukraine war impacted the energy prices of EU and NATO members but not those of non-EU and non-NATO countries. Additionally, only the energy prices in Southern and Western European countries have been significantly increased by the Russia-Ukraine war, in which Southern Europe has been the most affected, rising by 22%. These findings have great practical significance for analyzing the degree of influence of war on fluctuations in energy prices and geopolitical risks in regions. [ABSTRACT FROM AUTHOR]

The present study focuses on investigating the effect of renewable and non-renewable energy consumption (REC and NREC), financial development (FD), and inflation (INF) on economic welfare (EW) in India during 1990–2019. In this research, we employ a novel dynamic autoregressive distributed lag model and a kernel-based machine learning algorithm and regularise least squares to detect causal linkages among the variables. To measure the economic welfare index, this research uses the PCA analysis with GDP, human capital, environmental damage, number of employed persons, life expectancy at birth, and real consumption in households and by the government. According to the findings, the NREC and FD have been favourably contributing to EW. Conversely, the EW is adversely affected by REC. However, INF also has an adverse impact on EW, although it may be insignificant in the long run and significant in the short run. [ABSTRACT FROM AUTHOR]

We derive a traditional Phillips curve (TPC) under the assumption that a fraction of firms sells output at optimal prices, while the other fraction sells at contract prices. Our derivation delivers a pricing mechanism where inflation depends on expected inflation and the real optimal price, which is the real marginal cost. The parameters of this Phillips curve have a clear structural interpretation in much the same way as its new Keynesian counterpart. Using a Leontief-type technology, our baseline TPC features expected inflation, the labour share, demand pressure and a vector of supply shocks. We estimate this TPC for five developed and five emerging market economies and find that the degree of price rigidity is significant and correctly signed in most of the economies. We conclude that this TPC is a credible rival to its forward-looking new Keynesian counterpart. [ABSTRACT FROM AUTHOR]

This paper examines the relative significance of oil supply, oil demand, and monetary policy shocks in explaining US macroeconomic variations. We analyze impulse response functions and variance decomposition to assess the relative importance of these shocks. Using a Bayesian structural VAR framework and the penalty function approach, we identify the shocks of interest. We find that oil supply shocks explain less than 3% of the variation in output, but have a relatively larger impact on inflation, accounting for around 13% of the inflation variation. Oil demand shocks explain 3% of output variation, but contribute significantly to inflation variation (around 16%). In contrast, monetary policy shocks have a greater influence on output, explaining approximately 13% of the observed variation. Monetary policy shocks are also the most influential source of inflation variation, contributing over 24% to the overall variation. Based on historical variance decomposition, we find that the recent inflation surge is attributable to both monetary expansion and oil supply factors. Overall, the study highlights the dominance of monetary policy shocks in explaining US macroeconomic fluctuations, with oil supply and demand shocks playing secondary roles. [ABSTRACT FROM AUTHOR]

This paper presents a set of new core inflation measures for Brazil based on the Singular Spectrum Analysis (SSA) method. The measures are based on the official target used in the Brazilian inflation targeting regime. The period of analysis ranges from the beginning of the inflation targeting regime in 1999 and 2021. The SSA measures were compared to the inflation core ones used by the Central Bank of Brazil, through the evaluation of unbiasedness, short-term adjustment dynamics and predictive ability. The measures estimated by SSA meet the desired properties and have a greater predictive capacity than the other inflation cores.

Globalization is a phenomenon researchers have paid great attention to in recent years. They estimated that globalization is a key structural dynamic that could keep inflation low, especially in developed economies. Therefore, the aim of the paper is to examine the impact of globalization, i.e. its dimensions (economic, social, and political), on inflation in EMU countries as developed economies. Researchers use data from 1970 to 2021. ARDL approach is used to test the short and long-run relationship between globalization and inflation. The results show an increasing effect of globalization on inflation in the short-run and a decreasing effect in the long-run. The short-run effect of economic globalization results from the harmonisation process, while the long-run effect results from stronger competition with more domestic and abroad enterprises. The conclusions could give good recommendations to the policymakers on explaining the effect of economic globalization (trade, FDI flows, portfolio investment, etc.) on inflation and which long-run benefits economic globalization and openness have on inflation.

The COVID-19 pandemic had a profound impact on the restaurant industry in Alabama. This qualitative study examines how Alabama restaurants demonstrated resilience and adaptability across three distinct phases of the pandemic, including the period of unrestricted activities, offering a new perspective. The findings highlight significant operational, financial, and labor-related difficulties faced during these phases. Key strategies include operational adjustments, technology integration, and strategic financial management. The study underscores the critical role of technology in maintaining customer connections and adapting service models during disruptions. It introduces a conceptual model that offers valuable contingency plans for operational innovation and resilience, helping restaurants manage crises effectively. Additionally, the research emphasizes the crucial role of government financial support in the survival and recovery of restaurants during the pandemic. The study enriches the existing literature by providing insights into the post-recovery impact of COVID-19 on the restaurant sector.

After two decades of high economic growth and fast development progress, Ethiopia is facing significant macroeconomic challenges such as high inflation, foreign exchange shortage, and slowing growth. At the same time, it is imperative to bring the economy on a green and climate-resilient development path. In this context, the financial sector has an essential role to play. International financial institutions recommend reducing the fiscal deficit to dampen money growth and inflation and giving up exchange rate control. Based on an alternative analysis of inflation, this article argues that money supply restrictions and fiscal austerity may not only prove ineffective in addressing inflation while incurring high economic costs, but also impede a response that comes via productive and green investment to ease the economy’s supply-side constraints and to lower inflation. Rather than fixating on the quantity of money and market exchange rates, central banking should focus on the direction of financial flows to make sure they go into real green investment rather than speculative and inflation-driving investment. This policy blueprint will also reduce balance-of-payments problems and improve both internal and external monetary stability. [ABSTRACT FROM AUTHOR]

AbstractLucas (1972) permanently changed the course of macroeconomics, even though his “money supply surprise” model lost its central place in the area within a decade because of empirical difficulties. However, Lucas’s novel methodology, based on clearing markets and rational expectations, still dominates orthodox macroeconomic theorising. An unfortunate side effect of this has been that, because mainstream models have no analytic room for money to play a key role in economic activity, the theoretical case for taking that role seriously was undermined just at the time when traditional monetarist macro-models were facing empirical problems, not least in policy applications. Some consequences for today’s monetary policy environment are briefly discussed. [ABSTRACT FROM AUTHOR]

Rising global oil prices are a major challenge for an emerging oil-importing nation such as Bangladesh. The majority of prior research on the economic effects of an oil price shock has concentrated on developed countries, with emerging economies receiving comparatively less attention. Bangladesh is vulnerable to price shocks due to its rising oil consumption over the past decade. This study aims to investigate how changes in oil prices would affect Bangladesh's total export earnings and to forecast the overall export volume. This study utilized a nonlinear autoregressive distributed lag (NARDL) approach to account for the asymmetric behavior of oil prices from 1991 to 2021. To assess the accuracy of predictions, the study employed the Prophet forecasting model and the Long Short-Term Memory (LSTM) method. Additionally, the symmetry test revealed a nonlinear relationship between export volume and oil price but a linear relationship between inflation and export volume. According to the NARDL assessment, both positive and negative oil shocks increase export earnings over the long run. The short run summary clarifies that both positive and negative changes in oil prices exert a significant negative effect on exports. Also, Inflation influences export earnings negatively in the short run but positively over the long term. Moreover, using machine learning methods, it was found that the LSTM method outperforms the prophet model in prediction performance with a low root mean square error (RMSE) of 1.88. Also, the analysis revealed policymakers that the export sector requires diversification to reduce its exposure to oil price shocks.

Amidst persistent inflationary pressures in Africa and central banks raising rates to counter inflation, leading to a shift from stocks to alternative assets and impacting stock return volatility, this paper investigates the influence of inflation on stock return volatility in five African countries using the GARCH-MIDAS approach, using mixed data of daily and monthly frequencies. We observe that inflation is important for stock return volatility, as higher inflation increases volatility and reduces returns. Our results provide a better understanding of the dynamics of stock market volatility while accounting for the role of inflation, using the natural frequencies of the variables. Our findings encourage monetary authorities to communicate their inflation expectations to the market participants/investors to moderate negative stock return volatility.