Arshad Zabir
... increase in the real exchange rate (i.e. depreciation of Pak-rupee) could have a positive or negative effect on the demand for real money balances; therefore, which effect dominates is an empirical issue. 3. Data and Econometric Methodology The present study is based on quarterly data covering the p ...
... increase in the real exchange rate (i.e. depreciation of Pak-rupee) could have a positive or negative effect on the demand for real money balances; therefore, which effect dominates is an empirical issue. 3. Data and Econometric Methodology The present study is based on quarterly data covering the p ...
Current challenges for Europe
... it is under seven months in the United States.5 These characteristics have a particular impact on the dynamic properties of inflation. Prices in the euro area are slower to reflect changes in economic conditions. This means that inflationary pressure has a slower impact on price dynamics. Adjustment ...
... it is under seven months in the United States.5 These characteristics have a particular impact on the dynamic properties of inflation. Prices in the euro area are slower to reflect changes in economic conditions. This means that inflationary pressure has a slower impact on price dynamics. Adjustment ...
Inflation, Debt, and Default
... the co-movement between inflation and economic activity affect real sovereign yields, debt dynamics, and debt crises. To be more concrete, in Figure 1 we provide some motivating evidence for the mechanism we want to highlight. In panel (a), we plot quarterly time series for year-on-year U.S. inflati ...
... the co-movement between inflation and economic activity affect real sovereign yields, debt dynamics, and debt crises. To be more concrete, in Figure 1 we provide some motivating evidence for the mechanism we want to highlight. In panel (a), we plot quarterly time series for year-on-year U.S. inflati ...
Monetary Policy Objectives and Framework
... monetary base respond to the long-term average growth rate of real GDP and medium-term changes in the velocity of circulation of the monetary base. The rule is based on the quantity theory of money. The McCallum rule does not need an estimate of either the real interest rate or the output gap. The M ...
... monetary base respond to the long-term average growth rate of real GDP and medium-term changes in the velocity of circulation of the monetary base. The rule is based on the quantity theory of money. The McCallum rule does not need an estimate of either the real interest rate or the output gap. The M ...
Working Paper 189 - An Empirical Investigation of the Taylor Curve
... traces the points of minimum inflation and output-gap variability. The trade-off in the Taylor curve implies policy choices (Friedman, 2006). It is assumed that the central bank has two objectives, an inflation target and an output target, and in achieving these objectives tries to minimise a loss f ...
... traces the points of minimum inflation and output-gap variability. The trade-off in the Taylor curve implies policy choices (Friedman, 2006). It is assumed that the central bank has two objectives, an inflation target and an output target, and in achieving these objectives tries to minimise a loss f ...
A Literature Survey with Special Reference to Theories of Inflation
... clearly one-time increases in the price level.1 If equilibrium price level in a domestic market for goods and services rises continuously as a result of continued excess demand conditions in successive time periods, then economists speak in general from demand-pull inflation. In this case ...
... clearly one-time increases in the price level.1 If equilibrium price level in a domestic market for goods and services rises continuously as a result of continued excess demand conditions in successive time periods, then economists speak in general from demand-pull inflation. In this case ...
Inflation and Real Estate Investments
... in the opposite direction. For example, as discussed below, energy related supply shock inflation episodes such as the oil shocks of the 1970s will affect real estate returns differently than demand shock inflation deriving from either monetary or fiscal policy. Moreover, over the real estate cycle, ...
... in the opposite direction. For example, as discussed below, energy related supply shock inflation episodes such as the oil shocks of the 1970s will affect real estate returns differently than demand shock inflation deriving from either monetary or fiscal policy. Moreover, over the real estate cycle, ...
Egypt`s Monetary Policy Regime - COMESA Monetary Institute (CMI)
... In 2004, the board of directors agreed to establish several committees to facilitate the compliance with the objectives of the law No. 88 of 2003. The monetary policy committee (MPC) ...
... In 2004, the board of directors agreed to establish several committees to facilitate the compliance with the objectives of the law No. 88 of 2003. The monetary policy committee (MPC) ...
Answer Key - Department Of Economics
... 22. According to the aggregate demand and aggregate supply model, in the long run a decrease in the money supply leads to a. decreases in both the price level and real GDP. b. an increase in real GDP and an increase in the price level. c. a decrease in the price level but does not change real GDP. d ...
... 22. According to the aggregate demand and aggregate supply model, in the long run a decrease in the money supply leads to a. decreases in both the price level and real GDP. b. an increase in real GDP and an increase in the price level. c. a decrease in the price level but does not change real GDP. d ...
risk premia on key asset classes: a south african perspective
... The results of this paper are academic and theoretical in nature. It is not intended to form a basis of any decision by a party to do, or to omit to do, anything. It does not constitute, and should not be construed, as advice or recommendation in any way. The author and his employer accept no respon ...
... The results of this paper are academic and theoretical in nature. It is not intended to form a basis of any decision by a party to do, or to omit to do, anything. It does not constitute, and should not be construed, as advice or recommendation in any way. The author and his employer accept no respon ...
The Great Depression Lesson 6 - Could It Happen Again?
... 16. After studying the economy, the decision-makers at the Federal Reserve have decided to sell some valuable assets from the Fed’s portfolio (pencils and candy). Explain that these pencils are valuable and that people in the classroom economy like to own these valuable assets. Ask the students who ...
... 16. After studying the economy, the decision-makers at the Federal Reserve have decided to sell some valuable assets from the Fed’s portfolio (pencils and candy). Explain that these pencils are valuable and that people in the classroom economy like to own these valuable assets. Ask the students who ...
Key Review Questions for ECO 2030 final exam
... theories, and the effects of macroeconomic policies. The course provides a conceptual framework for understanding the influence of macroeconomics upon business and society. ...
... theories, and the effects of macroeconomic policies. The course provides a conceptual framework for understanding the influence of macroeconomics upon business and society. ...
Monetary Policy Statement September 2010 Contents
... Canterbury’s public infrastructure. Eventual reconstruction and repairs will require considerable resources over the next year or two, particularly in the construction sector. If, in the aftermath of the earthquake, the prices of some goods and services increase temporarily, monetary policy would re ...
... Canterbury’s public infrastructure. Eventual reconstruction and repairs will require considerable resources over the next year or two, particularly in the construction sector. If, in the aftermath of the earthquake, the prices of some goods and services increase temporarily, monetary policy would re ...
Some Monetary Facts
... larly have higher rates of inflation.” However, we doubt that the five-year averages Dwyer and Hafer use are long enough to reflect the steady-state relationships as they claim. Studies by Barro (1990) and Poole (1994) are also consistent with the fact of a high correlation between money growth and ...
... larly have higher rates of inflation.” However, we doubt that the five-year averages Dwyer and Hafer use are long enough to reflect the steady-state relationships as they claim. Studies by Barro (1990) and Poole (1994) are also consistent with the fact of a high correlation between money growth and ...
Principles of Economics, Case and Fair,8e
... normal working of the labor market; used to denote short-run job/skill matching problems. structural unemployment The portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries. ...
... normal working of the labor market; used to denote short-run job/skill matching problems. structural unemployment The portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries. ...
Inflation
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the consumer price index) over time. The opposite of inflation is deflation.Inflation affects an economy in various ways, both positive and negative. Negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future.Inflation also has positive effects: Fundamentally, inflation gives everyone an incentive to spend and invest, because if they don't, their money will be worth less in the future. This increase in spending and investment can benefit the economy. However it may also lead to sub-optimal use of resources. Inflation reduces the real burden of debt, both public and private. If you have a fixed-rate mortgage on your house, your salary is likely to increase over time due to wage inflation, but your mortgage payment will stay the same. Over time, your mortgage payment will become a smaller percentage of your earnings, which means that you will have more money to spend. Inflation keeps nominal interest rates above zero, so that central banks can reduce interest rates, when necessary, to stimulate the economy. Inflation reduces unemployment to the extent that unemployment is caused by nominal wage rigidity. When demand for labor falls but nominal wages do not, as typically occurs during a recession, the supply and demand for labor cannot reach equilibrium, and unemployment results. By reducing the real value of a given nominal wage, inflation increases the demand for labor, and therefore reduces unemployment.Economists generally believe that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. However, money supply growth does not necessarily cause inflation. Some economists maintain that under the conditions of a liquidity trap, large monetary injections are like ""pushing on a string"". Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth.Today, most economists favor a low and steady rate of inflation. Low (as opposed to zero or negative) inflation reduces the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reduces the risk that a liquidity trap prevents monetary policy from stabilizing the economy. The task of keeping the rate of inflation low and stable is usually given to monetary authorities. Generally, these monetary authorities are the central banks that control monetary policy through the setting of interest rates, through open market operations, and through the setting of banking reserve requirements.