INFLATION TARGETING, PATTERN OF TRADE, AND ECONOMIC DYNAMICS

2018 ◽  
Vol 23 (07) ◽  
pp. 2748-2786
Author(s):  
Juin-jen Chang ◽  
Wen-ya Chang ◽  
Hsueh-fang Tsai ◽  
Ping Wang
Keyword(s):  
Capital Accumulation ◽  
Inflation Targeting ◽  
Bilateral Trade ◽  
Inflation Target ◽  
Temporary Change ◽  
Long Run ◽  
The World ◽  
Short Run ◽  
World Distribution ◽  
Domestic Inflation

This paper develops an analytically tractable, two-country, two-traded-good dynamic general-equilibrium model of money to examine the long-run and short-run effects of a temporary change in the domestic inflation target on the trade pattern, the terms of trade, the foreign exchange rate, and the capital accumulation of each country and of the world economy. We find that such a temporary monetary innovation can generate permanent effects on the world distribution of capital and the pattern of trade, resulting in nonneutrality in an otherwise money-neutral cash-in-advance setting. This change also leads to very rich transitional dynamics that we fully characterize analytically. In particular, endogenous responses in transition can be monotone or nonmonotone and can exhibit over-shooting. Our analytic findings and quantitative results help explain some noticeable changes in the capital accumulation, output, and bilateral trade of several countries adopting inflation targeting. Since the permanent effects of a temporary change in the domestic inflation target on the pattern of international trade and the performance of the macroeconomy are driven by a new channel through the world distribution of capital, we add new insights to the literature.

scholarly journals Do Preconditions of Inflation Targeting Framework Matter?

2020 ◽  
Vol 12 (5) ◽  
pp. 51
Author(s):  
Syed Imran Ali Meerza
Keyword(s):  
Central Bank ◽  
Inflation Targeting ◽  
It Adoption ◽  
Inflation Target ◽  
The Public ◽  
Empirical Results ◽  
Effective Implementation ◽  
Public Announcement ◽  
Long Run ◽  
Short Run

The main feature of inflation targeting (IT) framework is the public announcement by the central bank that it will keep inflation at a numerical inflation target. A large literature addresses preconditions that a country should satisfy before adopting IT. However, there is much debate about whether satisfying these preconditions are essential. This study addresses this debate. Empirical results indicate that the fulfillment of preconditions before IT adoption ensures effective implementation of IT in the short-run. However, countries that met all preconditions before IT adoption do not have an advantage over countries that didn’t meet all preconditions before IT adoption in the long-run.

An Econometric Analysis on the Relationship between Globalisation and Inequality in South Africa

2020 ◽  
Vol 11 (1) ◽  
pp. 89-89
Author(s):  
Jacques de Jongh
Keyword(s):  
South Africa ◽  
Well Being ◽  
Causality Analysis ◽  
Global Integration ◽  
Development Indicators ◽  
Long Run ◽  
The World ◽  
Distribution Of Resources ◽  
Short Run ◽  
The Impact

Globalisation has had an unprecedented impact on the development and well-being of societies across the globe. Whilst the process has been lauded for bringing about greater trade specialisation and factor mobility many have also come to raise concerns on its impact in the distribution of resources. For South Africa in particular this has been somewhat of a contentious issue given the country's controversial past and idiosyncratic socio-economic structure. Since 1994 though, considerable progress towards its global integration has been made, however this has largely coincided with the establishment of, arguably, the highest levels of income inequality the world has ever seen. This all has raised several questions as to whether a more financially open and technologically integrated economy has induced greater within-country inequality (WCI). This study therefore has the objective to analyse the impact of the various dimensions of globalisation (economic, social and political) on inequality in South Africa. Secondary annual time series from 1990 to 2018 were used sourced from the World Bank Development indicators database, KOF Swiss Economic Institute and the World Inequality database. By using different measures of inequality (Palma ratios and distribution figures), the study employed two ARDL models to test the long-run relationships with the purpose to ensure the robustness of the results. Likewise, two error correction models (ECM) were used to analyse the short-run dynamics between the variables. As a means of identifying the casual effects between the variables, a Toda-Yamamoto granger causality analysis was utilised. Keywords: ARDL, Inequality, Economic Globalisation; Social Globalisation; South Africa

Determinants of Total Factor Productivity in Mexico, Indonesia, Nigeria, and Turkey (1980–2014)

2018 ◽  
Vol 4 (2) ◽  
pp. 192-217 ◽  
Author(s):  
Phillip Akanni Olomola ◽  
Tolulope Temilola Osinubi
Keyword(s):  
Human Capital ◽  
Total Factor Productivity ◽  
Negative Relationship ◽  
Annual Data ◽  
Factor Productivity ◽  
Distributed Lag ◽  
Long Run ◽  
The World ◽  
Government Stability ◽  
Short Run

This study analyzed the macroeconomic and institutional determinants of total factor productivity (TFP) in the MINT (Mexico, Indonesia, Nigeria, and Turkey) countries during the period 1980–2014. Annual data covering the period between 1980 and 2014 were used. Data on real gross domestic product (real GDP), labor force, gross fixed capital formation, foreign direct investment (FDI), human capital, and inflation were sourced from the World Development Indicators published by the World Bank. Also, data on corruption, government stability, and law and order were obtained from the database of International Country Risk Guide. Panel autoregressive distributed lag (PARDL) regression technique was used to estimate the model. Results showed that TFP growth rate declined on average by 1.4 per cent and 1.8 per cent in Mexico and Turkey, respectively, while Indonesia and Nigeria did not experience productivity growth on the average. Results also showed that in the long run, human capital and government stability had positive and significant effects on TFP, while FDI and corruption had negative but significant effects on TFP. In the short run, there existed a significant negative relationship between TFP and inflation. However, the effects of human capital and corruption on TFP were positive and significant. The study concluded that human capital and corruption were key drivers of TFP in the MINT countries both in the long run and short run.

scholarly journals Effects of Bilateral Real Exchange Rate on Sino-Nigeria Trade: An ARDL Cointegration Approach

2018 ◽  
Vol 10 (7) ◽  
pp. 125
Author(s):  
Julio Felippe Bicudo ◽  
Nnanna P. Azu
Keyword(s):  
Exchange Rate ◽  
Bilateral Trade ◽  
Bilateral Exchange ◽  
Long Run ◽  
Rate Fluctuation ◽  
Ardl Approach ◽  
Short Run ◽  
Negative Role ◽  
Balance Of Trade ◽  
Negative Balance

This research is motivated to scrutinise the effects of real bilateral exchange rate fluctuation on China-Nigeria bilateral trade, taking into consideration volatility and third country’s bilateral exchange rate effect to determine their consequences. Due to its robustness in time series analyses, an ARDL approach to co-integration was used to determine the long-and short-runs effects. Both export and import were considered separately. Outcome revealed that Nigeria’s import from China responds negatively to real bilateral exchange rate increase just as it does to its volatility. Her export to China reacts positively on both front, most especially in the short-run. Japan was integrated as a third country in this research due to her competing presence in Nigerian market. Third country’s real bilateral exchange rate play prominent but negative role in China-Nigeria trade, and is mostly effective in the long-run. With the absolute value of the co-efficient of real bilateral exchange rate greater than one, depreciating the Naira against the Renminbi will tend to ameliorate the negative balance of trade Nigeria has with China. Finally, democratic regime was found to be very essential in enhancing international business.

scholarly journals China integrates Asia with the world: an empirical study

2014 ◽  
Vol 7 (2) ◽  
pp. 70-89 ◽  
Author(s):  
Soumyananda Dinda
Keyword(s):  
Economic Integration ◽  
Data Availability ◽  
Trade Integration ◽  
Policy Makers ◽  
Content Type ◽  
Promotion Policies ◽  
Long Run ◽  
The World ◽  
The Usa ◽  
Short Run

Purpose – The aim of this paper was to focus on China’s economic integration with Asia region and the world. It also attempts to find the long-run relation with short-run dynamics of China’s trade in Asia and the world. Design/methodology/approach – The augmented Dickey–Fuller and Phillips–Perron methods are applied to test the time-series properties of the variables. Co-integration technique is used to detect the economic integration of China’s export to the USA and its import from Asian nations using monthly aggregate data from December 2005 to July 2010. Findings – This study observed that empirically China’s export to the USA depends on exchange rate and China’s import from Asia depends on China’s export to the USA. China has double role in international trade – China acts as an attractor of all inputs from Asia, and China exports the final products in international market. This study also reveals that the speed of China’s import from Asia is faster than that of China’s export to the USA. Research limitations/implications – This study has some limitation in terms of data availability, and choice of methodology like the Gravity model Practical implications – The results imply that China’s trade should be treated as an engine of growth in the Asian developing countries and the trade promotion policies should be encouraged. The emerging China will create other opportunities through trade integration with Asia and the world. Social implications – These empirical findings will help policy-makers formulate their policy and design the mechanism for application as per their targets. Originality/value – China is economically integrated with the region and the world. The paper contributes to measure the speed of China’s export and import in short run within Asia and the world. These empirical findings will help policy-makers to formulate their policy and design the mechanism for application as per their targets.

scholarly journals The Asymmetric Influence of Financial Development on Economic Growth in Kenya: Evidence From NARDL

SAGE Open ◽  
2020 ◽  
Vol 10 (1) ◽  
pp. 215824401989407 ◽  
Author(s):  
Hao Chen ◽  
Duncan O. Hongo ◽  
Max William Ssali ◽  
Maurice Simiyu Nyaranga ◽  
Consolata Wairimu Nderitu
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Government Spending ◽  
Capital Accumulation ◽  
Research Question ◽  
Government Expenditure ◽  
Model Specification ◽  
Long Run ◽  
Short Run ◽  
Auto Regressive

This study analyzed the asymmetric effects of financial development on economic growth using a model augmented with inflation and government expenditure asymmetries to inform model specification. The research question used entails, Do their asymmetry changes significantly influence growth? Using the nonlinear auto-regressive distributive lag (NARDL), the most significant results posit that positive shocks in financial development in the short run and its negative shocks in the long run increase and decrease economic growth, respectively. Regarding inflation, its positive (negative) shocks in both runs, respectively, reduce (increase) economic growth. In comparison, positive shocks in financial development that spur growth in the short run and negative shocks in financial development (government expenditure) that increase (reduce) growth are the most domineering effects as the rest of the shocks insignificantly affect growth. Results clearly demonstrate to an environment steered by stable and sustainable inflation that regulated government expenditure and comprehensive financial system deepening would positively cause economic growth. Therefore, appropriate policies that favor low inflation and reduced government spending, expansion of feasibly reformed financial institutions, capital accumulation, and increased resource mobilization should be instituted if real growth is to positively happen.

scholarly journals Roles of Political and Economic Environments on Agricultural Commodity Import Demand in Developing Economy: A Case Study of Rice Sub-Sector in Nigeria

2015 ◽  
Vol 7 (12) ◽  
pp. 84
Author(s):  
Sunday B. Akpan ◽  
Glory E. Emmanuel ◽  
Inimfon V. Patrick
Keyword(s):  
Exchange Rate ◽  
Capacity Utilization ◽  
Import Demand ◽  
Nominal Exchange Rate ◽  
Domestic Production ◽  
World Price ◽  
Long Run ◽  
The World ◽  
Short Run ◽  
Industrial Capacity

<p>Nigeria is currently the largest importer of milled rice in the world. The country has implemented several trade policies, set up institutions and incentives to boost domestic production with the intention to meet both domestic and international demands. Despite these attempts and favorable climatic, manpower and edaphic conditions in the country, Nigeria still spent millions of dollars on annual basis on rice imports. Based on this assertion, the study rather examined the roles of political and economic environments on rice import demand from 1960 to 2014 in Nigeria. Time series data were obtained from FAO, Central Bank of Nigeria and National Bureau of Statistics as well as World Bank. Augmented Dickey-Fuller-GLS unit root test showed that all series were integrated of order one. The long-run and short-run elasticity of rice import demand were determined using the techniques of co-integration and error correction models. The trend in rice import revealed that, the country had witnessed significant average positive exponential growth rate of about 15.975% in rice import from 1960 to 2014. The empirical results revealed that, the long run import demand function of rice responded negatively to the world price, industrial capacity utilization, nominal exchange rate, and the value of gross domestic production; whereas, it reacted positively to period of civilian rule, nominal value of external reserve, period of liberalization and the net volume of credit to the entire economy. The symmetric adjustment coefficient of rice import demand to a long run equilibrium stood at 39.65% per annum. In the short run, rice import had a significant negative and elastic relationship with the domestic and world price of rice; while it has significant positive inelastic association with external reserve and net credit to the economy. Based on these results; it is recommended that, the Nigeria government should designed programmes and incentives to boost industrial capacity utilization in the country. Markets determine nominal exchange rate should prevail in the economy. The country should regulate its foreign reserve policy by setting a threshold, above which excess deposit should be plough back to the domestic economy inform of investments rather than support excessive importation.</p>

Exchange-Rate Volatility and Industry Trade Between Japan and China

2012 ◽  
Vol 12 (3) ◽  
pp. 1850268 ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Scott W. Hegerty ◽  
Jia Xu
Keyword(s):  
Exchange Rate ◽  
Bilateral Trade ◽  
Exchange Rate Volatility ◽  
Trade Flows ◽  
Negative Effects ◽  
Exchange Rate Uncertainty ◽  
Long Run ◽  
Bilateral Trade Flows ◽  
Short Run ◽  
Export Industries

Exchange-rate risk is often thought to reduce international trade flows, but numerous theoretical and empirical analyses have pointed toward positive as well as negative effects. This is particularly true when bilateral trade flows for individual industries are estimated. In this study, we extend the literature to the case of Japanese trade with China for 110 import industries and 95 export industries. Aggregate Japanese exports, but not imports, respond to real exchange rate volatility in the long run, while most individual export and import industries respond in the short run. Although many individual Japanese import industries are affected in the long run by risk, mostly negatively, this is even more the case for exporters. A larger proportion of Japanese export industries are affected by exchange rate uncertainty for most industry sectors. Manufacturing exports are particularly vulnerable to this risk, with a large share responding negatively to increased volatility.

scholarly journals Domestic Resource Mobilization and Human Capital Development in Sub- Saharan Africa

2021 ◽  
Vol 27 (4) ◽  
pp. 504-533
Keyword(s):  
Human Capital ◽  
Capital Accumulation ◽  
Resource Mobilization ◽  
Human Capital Accumulation ◽  
Human Capital Development ◽  
Long Run ◽  
Short Run ◽  
Two Measures ◽  
Capital Development ◽  
Domestic Resource

This study investigates the nexus between domestic resource mobilization using aggregated and disaggregated taxes, and human capital accumulation as measured by the index of human capital and total factor productivity. The study explores panel Autoregressive Distributed Lag. We further explore the linear and nonlinear effects of taxes on human capital accumulation. The results from the scatterplots show that taxes at aggregate and disaggregated levels positively correlated with the two measures of human capital. On the linear analysis, the impact of aggregated and disaggregated taxes is largely negative under the index of human capital but largely positive under the second measure in the short-run. However, the long-run results indicate that aggregate and disaggregated taxes significantly amplify human capital accumulation. On nonlinearity, there is no presence of human capital laffer curve (HCLC) in the short-run under the two measures of human capital. However, there is presence of HCLC in the long-run. The net effects results show that some taxes (such as indirect taxes, taxes on goods and services) are distortionary in improving the level of human capital development while some taxes (such as total tax, direct tax, taxes on income, profit, and gains) can distort human capital development in the SSA region.

Sign in / Sign up

Export Citation Format

Share Document