On the real effects of inflation and inflation uncertainty in Mexico

We estimate an augmented multivariate GARCH-M model of inflation and output growth for Mexico at business cycle frequencies. The main findings are: (1) inflation uncertainty has a negative and significant effect on growth; (2) once the effect of inflation uncertainty is accounted for, lagged inflation does not have a direct negative effect on output growth; (3) However as predicted by Friedman and Ball, higher average inflation raises inflation uncertainty, and the overall net effect of average inflation on output growth in Mexico is negative. That is, average inflation is harmful to Mexican growth due to its impact on inflation uncertainty. (4) The Mexican Presidential election cycle significantly raises inflation uncertainty both during the year of the election and the year following the election which has correspondingly negative effects on output growth.     

中国通胀水平与通胀不确定性:马尔柯夫域变分析

本文使用中国1985年以来月度数据,基于马尔柯夫域变模型考察了通胀水平及其与不确定性的关系。我们将通胀的不确定性分解为两类成分:未来通胀冲击的不确定性和未来通胀均值域变的不确定性。研究结果表明,高的通胀水平伴随着这两类不确定性成分的同时增大,这意味着通胀成本很大程度上和不确定性的成本联系在一起,稳定价格和维持低通胀环境可能成为央行减少不确定性的重要手段。本文结果还表明,域变模型相对线性自回归模型以及ARCH模型更好地刻画了中国通胀率过程的特点。以往应用中忽略了这种域变特点可能导致通胀预测值相对于真实值的系统性偏差,或者通胀不确定性的错误估计。     

The effect of inflation uncertainty on inflation: Stochastic volatility in mean model within a dynamic framework

This paper investigates the effect of inflation uncertainty innovations on inflation over time by considering the monthly United States data for the time period 1976–2006. In order to investigate the effect of inflation uncertainty innovation on inflation, a Stochastic Volatility in Mean model (SVM) has been employed. SVM models are generally used to capture the innovation to inflation uncertainty, which cannot be achieved in the framework of popular deterministic ARCH type of models. Empirical evidence provided here suggests that innovations in inflation volatility increases inflation persistently. This evidence is robust across various definitions of inflation and different sub-periods.     

Inflation and inflation uncertainty in China

The study examines the relationship between inflation and inflation uncertainty in China using Generalized Autoregressive Conditional Heteroscedasticity model. Particularly, this link is investigated in China’s urban and rural sectors, motivated by the substantial urban–rural divide. The results provide strong statistical supportive evidence that higher inflation raises inflation uncertainty. On the other hand, evidence on the effect of inflation uncertainty on inflation is mixed depending on the sample periods and areas examined. The understanding of inflation-uncertainty nexus in China could provide implications to policymakers in the adoption of monetary policies.     

中国的通货膨胀惯性与通货膨胀不确定性——基于有限理性NKPC模型的分析

本文拓展有限理性菲利普斯曲线模型并结合中国参数进行校准,然后利用校准模型研究中国通货膨胀惯性特征及其与通货膨胀不确定性之间的关系。结果显示,有限理性菲利普斯曲线模型能很好地模拟出与中国实际通货膨胀惯性类似的特征。进一步研究还发现,研究样本期间,中国通货膨胀惯性总体上呈现先上升而逐渐下降的驼峰型特征,而且与通货膨胀预期不确定性存在正向相关关系。这些发现意味着,我国中央银行货币政策滞后效应正在缩短,而为了进一步降低通胀惯性并提高货币政策有效性,引导通货膨胀预期保持稳定是一大途径。     

Testing similarities of short-run inflation dynamics among EU-25 countries after the Euro

In this paper, we introduce two new definitions of pair-wise and multi-wise similarity between short-run dynamics of inflation rates in terms of equality of forecast functions and show that in the context of invertible ARIMA processes the autoregressive metric introduced by Piccolo (1990) is a useful measure to evaluate such similarity. Then, we study the similarity of short-run inflation dynamics across European Union (EU)-25 Member States during the Euro period. Consistent with studies on inflation differentials and inflation persistence, our findings suggest that after seven years from the launch of the Euro the degree of similarity of short-run inflation dynamics across Euro area countries is still weak. By contrast, we find that EU countries not adopting the common currency, whether old EU or new accession Members, display a higher degree of inflation dynamics similarity both among each other and with Euro area countries.     

Relative inflation dynamics in the new EU member countries of Central and Eastern Europe

Following their EU accession, the new member countries from Central and Eastern Europe (CEE) must achieve sustainable price stability as one of the pre-conditions for joining the Economic and Monetary Union (EMU) and adopting the euro. This article examines the distribution dynamics of inflation rates in ten new EU members from CEE relative to the EMU accession benchmark inflation over the period 1990–2009. In contrast to previous studies, we use nonparametric methods to test for convergence in inflation rates between CEE and the EMU benchmark as well as within the CEE sample. Over the entire sample period, we detect a general shift in the CEE inflation distribution toward the EMU benchmark along with intradistributional convergence. However, this process is not uniform. In the early years, it was equally likely for CEE inflation rates to move toward or away from the benchmark. The resulting multimodal distribution gave way to a unimodal distribution in the years leading up to the EU accession, accompanied by a marked shift toward the EMU benchmark. In more recent years, emergence of a bimodal distribution signaled the stratification of relative inflation in CEE into two convergence clubs, which has intensified since the start of the global economic crisis.     

The time-varying effect of inflation uncertainty on inflation for Turkey

We investigate the effect of inflation uncertainty on inflation from January 1982 through March 2016 for Turkey by using the Stochastic Volatility in Mean model with time-varying parameters. Our empirical evidence from consumer price index (CPI) inflation suggests that the observed positive relationship between inflation and inflation uncertainty is not robust. This positive relationship diminishes after 2002. This finding is valid for all five subcomponents of CPI inflation; however, for Health Services, Transportation Services, and Recreational and Cultural Services, an inflation-positive association is reported after 2010.     

Constrained discretion in Sweden

We study whether the institutional adoption of inflation targeting (IT) has constituted both a policy and a macroeconomic switch in Sweden using the nonlinear MSVAR technique. We assess the relative weight put on inflation in the monetary reaction function and the capacity of IT to reduce macroeconomic uncertainty. We show that IT has constituted a policy switch to a lower focus on inflation, in contrast with the usual argument that has been put forth by IT opponents. Moreover, IT adoption is shown to have reduced uncertainty, through lower inflation and output variabilities simultaneously. Last, counterfactuals suggest IT provides higher monetary policy leeway.     

中国贸易开放度、贸易结构与通货膨胀不确定性关系

完全预期到的通货膨胀在理论上并不会对真实经济活动产生实质性的影响,通货膨胀的真正危害在于它的不确定性。随着贸易开放的不断扩大和深化,影响中国通货膨胀的不确定性的因素变得更加复杂。本文利用EGARCH模型估计了中国的通货膨胀不确定性,并在此基础上利用协整分析方法检验了贸易开放度、贸易结构与通货膨胀不确定性的关系。研究表明:贸易开放度的提高对通货膨胀不确定性具有负向的影响;贸易结构的变化对通货膨胀不确定性具有正向的影响。     

Evaluating inflation persistence considering model uncertainty and structural break

There is little consensus about the historical change in inflation persistence. One of the reasons is that researchers cannot choose a uniform model structure due to model uncertainty. In this study, a model to investigate inflation persistence is proposed. Unlike previous studies, I try to overcome model uncertainty by being agnostic about the structure of the model. Estimation results indicate that inflation has become less persistent over time, implying that inflation persistence is related to the way how monetary policy is conducted.     

基于不确定性视角的PPI与CPI传导关系真相研究

通货膨胀背景下,有关PPI和CPI之间的价格传导关系成为备受关注的热点问题,但现有文献均局限于PPI和CPI均值意义上的格兰杰因果性讨论。事实上,无论从宏观理论出发还是从计量理论出发,PPI和CPI衡量的通胀率的不确定性(inflation uncertainty)及不确定性间的相关性更应引起学术界以及货币当局的关注。鉴于此,我们借鉴Hafner and Herwartz(2004)提出的二阶矩意义的格兰杰因果检验方法,构建Wald形式的统计量对CPI和PPI不确定性因果关系进行检验,发现从通胀不确定性视角来看,PPI和CPI是相互传导的,从传导模式来看,无论以PPIMG还是以CGP"I充当"PPI,均只能在短期影响CPI,而CPI对它们的影响在长短期都是一贯的。由此推断,CPI到PPI方向构成了二者不确定性传导的"系统性"路径,通胀治理须从需求方考虑。     

通货膨胀不确定性及其对宏观经济的影响

利用马尔科夫范式转换模型分析了1985年1月到2009年7月我国通货膨胀的状态转换特征,并考察了与之伴随的不确定性及其对我国主要宏观经济变量的影响,发现通货膨胀不确定性仅对消费波动有显著影响,对投资和净出口的影响不显著,且方差不确定性和均值不确定性分别导致了消费波动增大与减小.通货膨胀不确定性凸显了宏观调控的重要性,积极、有效、透明的政策能够减少消费所面临的不确定性,保证居民消费的稳定和可持续增长,将有助于扩大内需,促进我国经济增长.     

Long memory,economic policy uncertainty and forecasting US inflation: a Bayesian VARFIMA approach

We compare inflation forecasts of a vector autoregressive fractionally integrated moving average (VARFIMA) model against standard forecasting models. U.S. inflation forecasts improve when controlling for persistence and economic policy uncertainty (EPU). Importantly, the VARFIMA model, comprising of inflation and EPU, outperforms commonly used inflation forecast models.     

On the determinants of long-run inflation uncertainty: Evidence from a panel of 17 developed economies

Based on a cross section of 17 advanced economies and data for the period 1975 to 2015, we examine how the interaction between monetary policy and macroeconomic conditions affects inflation uncertainty in the long-term. We construct a proxy for the unobservable inflation uncertainty based on the slowly evolving long-term variance component of inflation from a Spline-GARCH model (Engle and Rangel, 2008). We show that long-run inflation uncertainty is high if an inflation-tolerant central bank governor is in power during a period of high inflation, if the policy rate is below the one that is prescribed by the Taylor rule and during times of heightened stock and exchange rate volatility.     

Inflation literacy and inflation expectations: Evidence from Austrian household survey data

Inflation expectations are known to be quite heterogeneous across agents. We investigate whether this heterogeneity is primarily due to differences in people’s understanding of the inflation process and of the goals and intentions of the central bank. Using micro data from a survey conducted among 2000 Austrian households, we construct an indicator of “inflation literacy” from several questions on people’s knowledge about different aspects of inflation. We find that this indicator helps explain both the level and the uncertainty of inflation expectations: Households with relatively higher levels of inflation literacy tend to have lower and more accurate short-term and long-term inflation expectations. Interestingly, however, they are less certain about their inflation expectations than people with lower levels of inflation literacy. We also find that people’s trust in the central bank and in its ability to maintain price stability significantly dampens their inflation expectations.     

Why are price stability and statutory independence of central banks negatively correlated? The role of culture

This paper investigates whether in OECD countries the negative relation between central bank independence and inflation is related to culture, in the sense of common values and norms. It appears that inflation is lower in countries where people dislike uncertainty. Countries, where inhabitants perceive that there should be an order of inequality and a centralisation of authority, are characterised by a dependent central bank and, to a lesser extent by relatively high inflation rates. Hence, the national attitude towards inequality among people appears to be a third factor explaining the negative correlation between inflation and the degree of central bank independence.     

Macroeconomic effects of Slovenia’s integration in the Euro Area

On 1 January 2007, Slovenia entered the Euro Area as the first of the ten new EU member states. By means of simulations with SLOPOL6, a macroeconometric model of the Slovene economy, this paper examines which macroeconomic effects can be expected from this event. It is shown that Euro Area accession brings about temporarily higher real GDP growth, a permanently higher GDP level, more employment, temporarily lower inflation and a permanently lower price level. On the other hand, both public finances and the current account deteriorate.      

Stepping on a rake: The role of fiscal policy in the inflation of the 1970s

The inflation of the 1970s in the US is often discussed as if the only type of policy action that could have prevented the inflation were monetary policy actions and the only type of policy errors that might have induced the inflation were monetary policy errors. Yet fiscal policy underwent dramatic shifts in the 1970s and economic theory makes clear that in an environment of uncertainty about future fiscal policy, monetary policy instruments may lose potency or have perverse effects. This paper documents the vagaries of fiscal policy in this period and argues that people at the time must have been uncertain about fiscal policy's future course. It also lays out a theoretical framework for understanding the effects of fiscal uncertainties on monetary policy and shows that fiscal variables have predictive value in dynamic models, even if traditional monetary policy indicators are included in the system.     

通货膨胀预期形成、锚定:基于消费者和经济学家预期的分析

本文在区分居民通货膨胀预期和经济学家通货膨胀预期的基础上,研究通货膨胀预期形成和锚定的特点,发现经济学家通货膨胀预期呈现不规则的正态分布,往往在通货膨胀实际值较低时更多的经济学家做出偏高预期.居民通货膨胀预期显示低收入阶层对物价上涨更为敏感,大城市居民通货膨胀预期最敏感.总体如果半数以上的人认为物价上涨,则出现恶性通货膨胀的概率增加.发现居民物价预期指数是通货膨胀的格兰杰成冈,但经济学家通货膨胀预期却不必然导致通货膨胀发生.国际比较发现英国居民物价预期指数显著高于中国.锚定通货膨胀预期的关键是防止通货膨胀预期加速形成,防止中央银行陷入通货膨胀预期陷阱,为此需要单一化中央银行职责,建立通货膨胀预期中期监测机制,竖立中央银行反对通货膨胀的信任度.