Does New Zealand's inflation target anchor long-term expectations?

2021 ◽  
pp. 1-23
Author(s):  
Alan King
Keyword(s):  
Inflation Target

scholarly journals Monetary policy special features in the context of low interest rates

2020 ◽  
Vol 2 ◽  
pp. 50-64
Author(s):  
Kristina Nesterova ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Price Level ◽  
Nominal Interest Rate ◽  
Inflation Target ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Monetary Rules

Introduction. The paper considers a wide range of monetary policy rules: integral stabilization, NGDP targeting, price level targeting, raising the inflation target, introducing negative nominal interest rates etc. The author also considers discretionary policy used by central banks when the nominal rate is close to zero, such as dramatic preventive cut of the key interest rate and interventions in the open markets with the aim of cutting long-term interest rates. The relevance of this problem is supported by global long-term macroeconomic and demographic factors, such as the dynamics of oil prices and the aging of the population. The aim of the paper is to identify the most effective monetary policy rules in order to reduce the risk of a nominal interest rate falling to zero. Methods. Analysis of the background and the results of general equilibrium models modeling monetary policy is carried out. Analysis of the role of current global trends (based on statistics) in aggravating the problem of declining interest rates. Scientific novelty of the research. The author systematizes the conclusions of modern macroeconomic theory, which offers a number of monetary rules making it possible to reduce the likelihood of falling into the zero bound of interest rate. Results. The effectiveness of monetary rules such as targeting nominal GDP and price levels in preventing the nominal interest rate from falling to zero is shown, primarily due to more efficient public expectations management which is a weak point of discretionary intervention. Conclusions. Under the current global factors for many developed countries and some oil-exporters, the downward trend in nominal rates persists. Combined with slowdown in economic growth, such threat may have negative consequences for the Russian economy. In this case, it seems reasonable to stick to the inflation target above 2% per year and in the future to consider switching to targeting the price level or nominal GDP.

scholarly journals Correction of monetary policy under the influence of corona crisis and long-term factors

2021 ◽  
Vol 2021 (2) ◽  
pp. 65-92
Author(s):  
Tetiana Krychevska ◽  
◽  
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Macroeconomic Policy ◽  
Inflation Target ◽  
Structural Problems ◽  
Potential Gdp ◽  
Monetary And Fiscal Policy

The article shows the modification of monetary policy and modification of its interaction with fiscal policy in response to the challenges of the global financial crisis and the corona crisis, as well as reveals potential macroeconomic policy adjustments in response to long-term structural changes in the global economy. The specificity of the global financial and economic crisis, which was caused by financial intermediaries, and the belief in markets efficiency led to the dominance of monetary instruments in combating this crisis. However, purely monetary stimulus does not solve structural problems, and, acting with a very low degree of targeting, but on a huge scale, leads to the debt accumulation and financial crises. The corona crisis forced to resort to budget incentives to ensure targeted support for people and businesses and provided an impetus to discuss the ways to make better use of fiscal policy capacity to increase potential GDP and reduce inequality. The following potential long-term adjustments of macroeconomic policy are revealed: 1) increasing the emphasis on the interests of employees; 2) increasing the inclusiveness of monetary and fiscal policy; 3) the growing role of fiscal policy as an instrument of macroeconomic stabilization; 4) revision of the theory of monetary and fiscal policy interaction; 5) revision of the pre-emptive approach to anti-inflation policy, which means the reaction of monetary policy to deviations of the inflation forecast from the target, and the emergence of alternatives: response to the actual achievement and maintenance the inflation target for some time and compensation for the previous deviations from the inflation target; 6) modification of the optimal anti-inflationary policy in response to demand-pull inflation and cost-push inflation; 7) adjustment of the monetary policy in response to rising inflation due to the exhaustion of long-standing global disinflationary forces that have been in effect since the 1980s; 8) more active monetary and fiscal stimulus in emerging market economies.

scholarly journals INFLATION TARGETING UNDER IMPERFECT CREDIBILITY: LESSONS FROM INDONESIAN EXPERIENCE

2011 ◽  
Vol 13 (3) ◽  
pp. 271-306
Author(s):  
Harmanta Harmanta ◽  
M. Barik Bathaluddin ◽  
Jati Waluyo
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Policy Instrument ◽  
Jel Classification ◽  
Inflation Target ◽  
Sacrifice Ratio ◽  
Economic Agents ◽  
Inflation Expectation ◽  
Imperfect Credibility

This paper try to assess role of credibility in the implementation of inflation targeting framework in Indonesia. It illustrates how credibility may play an important role in the evolution of the Indonesian monetary policy. Knowing the degree of credibility would beneficial for Bank Indonesia (BI) to understand how to adjust policy instrument to achieve a long-term inflation target. Scaled from zero (purely not credible) to one (perfect credibility), our quantitative measurements found that credibility index for Indonesian monetary policy converge to around 0.5. Refer to projection and simulation results in this paper, the study shows expectation inflation of economic agents is strongly influenced by monetary policy credibility. The more credible the monetary policy, the faster inflation expectation would anchor to its target. In addition, high credibility also increase the efficiency of the monetary policy transmission since the disinflation cost represented by sacrifice ratio is lower. Under imperfect credibility the central bank prefer to attain its inflation target gradually, and if the credibility stock is doubled, then achieving its long-term inflation target required a lot shorter time (approximately 0.4 periods than the baseline). JEL Classification: E31, E52, E58, E61Keywords: Disinflation, Monetary Policy, Imperfect Credibility, Sacrifice Ratio

scholarly journals Dampak Liberalisasi Perdagangan terhadap Perilaku Pembentukan Harga Produk Industri melalui Structure-Conduct Performance Model

2005 ◽  
Vol 7 (4) ◽  
pp. 523-554
Author(s):  
Siti Astiyah ◽  
Akhis R. Hutabarat ◽  
Desthy V.B. Sianipar
Keyword(s):  
Trade Liberalization ◽  
Performance Model ◽  
Profit Margin ◽  
Price Determination ◽  
Domestic Price ◽  
Inflation Target ◽  
Pooled Data ◽  
The Social ◽  
The Impact

This paper analyzes the impact of trade liberalization on the domestic price of industry product by utilizing the structure-conduct-performance (SCP) model. Applying the model to a pooled data of the 3 digits ISIC level of Indonesian industry product, the result shows the abnormal price determination on industry level after the increase of trade liberalization. The existence of this phenomenon, the downward profit-margin rigidity, is indicated by the increase of the profit margin, which reduces the social welfare and tends to persist the inflation. A clear consequence for the Indonesian Central Bank, is to faster and increase the credibility of the middle and long term inflation target, either by clarify the policy signal and its consistency and increase the cooperation with the government.JEL: E31, L11, O24, P23Keyword:Trade liberalization, Structure-Conduct-Performance, Price, Industry

INFLATION TARGETING UNDER INFLATION UNCERTAINTY—MULTI-ECONOMY EVIDENCE FROM A STOCHASTIC VOLATILITY MODEL

2020 ◽  
pp. 1-36
Author(s):  
Matthias Hartmann ◽  
Helmut Herwartz ◽  
Maren Ulm
Keyword(s):  
Stochastic Volatility ◽  
Inflation Targeting ◽  
Stochastic Volatility Model ◽  
Target Level ◽  
Short Term ◽  
Inflation Target ◽  
Inflation Uncertainty ◽  
Inflation Rates ◽  
Volatility Model

One of the most important advantages of an inflation target is that it helps to reduce uncertainty about future inflation. However, this confidence may be undermined if actual inflation continuously deviates from the target level. We examine how inflation uncertainty relates to the presence of an inflation target and deviations of inflation from the targeted level. Inflation uncertainty is quantified by means of an unobserved components stochastic volatility model that allows to distinguish between permanent and transitory inflation uncertainty. While long-term inflation appears largely stable in most economies, the short-term inflation uncertainty is found to be time-varying. Most notably, short-term inflation uncertainty is high if inflation rates are below the target level. This is particularly relevant for economies which are currently confronted with the presence of persistently low-inflation rates. Our findings suggest that announcing higher inflation targets as it is currently discussed may be costly in terms of provoking higher inflation uncertainty.

scholarly journals THE ANCHORING OF INFLATION EXPECTATIONS IN THE SHORT AND IN THE LONG RUN

2017 ◽  
Vol 23 (5) ◽  
pp. 1959-1977 ◽  
Author(s):  
Dieter Nautz ◽  
Till Strohsal ◽  
Aleksei Netšunajev
Keyword(s):  
Structural Var ◽  
Inflation Expectations ◽  
News Shocks ◽  
Inflation Target ◽  
Structural Shocks ◽  
Var Analysis ◽  
Long Run ◽  
Macro News

This paper introduces structural VAR analysis as a tool for investigating the anchoring of inflation expectations. We show that US consumers' inflation expectations are anchored in the long run because macro-news shocks are long-run neutral for long-term inflation expectations. The identification of structural shocks helps to explain why inflation expectations deviate from the central bank's target. Our results indicate that the recent decline in long-term inflation expectations does not result from deanchoring macro-news but can be attributed to downward adjustments in consumers' expectations about the central bank's inflation target.

scholarly journals INFLATION TARGETING UNDER IMPERFECT CREDIBILITY BASED ON ARIMBI (Aggregate Rational Inflation - Targeting Model for Bank Indonesia); LESSONS FROM INDONESIAN EXPERIENCE

2011 ◽  
Vol 13 (3) ◽  
Author(s):  
Harmanta Harmanta ◽  
M. Barik Bathaluddin ◽  
Jati Waluyo
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Policy Instrument ◽  
Jel Classification ◽  
Inflation Target ◽  
Sacrifice Ratio ◽  
Economic Agents ◽  
Inflation Expectation ◽  
Imperfect Credibility

This paper try to assess role of credibility in the implementation of inflation targeting framework in Indonesia. It illustrates how credibility may play an important role in the evolution of the Indonesian monetary policy. Knowing the degree of credibility would beneficial for Bank Indonesia (BI) to understand how to adjust policy instrument to achieve a long-term inflation target.Scaled from zero (purely not credible) to one (perfect credibility), our quantitative measurements found that credibility index for Indonesian monetary policy converge to around 0.5. Refer to projection and simulation results in this paper, the study shows expectation inflation of economic agents is strongly influenced by monetary policy credibility. The more credible the monetary policy, the faster inflation expectation would anchor to its target. In addition, high credibility also increase the efficiency of the monetary policy transmission since the disinflation cost represented by sacrifice ratio is lower. Under imperfect credibility the central bank prefer to attain its inflation target gradually, and if the credibility stock is doubled, then achieving its long-term inflation target required a lot shorter time (approximately 0.4 periods than the baseline).JEL Classification: E31, E52, E58, E61Keywords: Disinflation, Monetary Policy, Imperfect Credibility, Sacrifice Ratio

Therapy and prevention for mental health: What if mental diseases are mostly not brain disorders?

2019 ◽  
Vol 42 ◽  
Author(s):  
John P. A. Ioannidis
Keyword(s):  
Mental Health ◽  
Mental Disease ◽  
Brain Disorders ◽  
Social Stressors ◽  
Labor Education ◽  
Mental Diseases ◽  
Long Term Follow Up ◽  
Political Decisions

AbstractNeurobiology-based interventions for mental diseases and searches for useful biomarkers of treatment response have largely failed. Clinical trials should assess interventions related to environmental and social stressors, with long-term follow-up; social rather than biological endpoints; personalized outcomes; and suitable cluster, adaptive, and n-of-1 designs. Labor, education, financial, and other social/political decisions should be evaluated for their impacts on mental disease.

Conceptual short-term memory (CSTM) supports core claims of Christiansen and Chater

2016 ◽  
Vol 39 ◽  
Author(s):  
Mary C. Potter
Keyword(s):  
Working Memory ◽  
Rapid Serial Visual Presentation ◽  
Language Comprehension ◽  
Short Term Memory ◽  
Visual Presentation ◽  
Long Term Memory ◽  
Short Term ◽  
Term Memory ◽  
Use Of Knowledge

AbstractRapid serial visual presentation (RSVP) of words or pictured scenes provides evidence for a large-capacity conceptual short-term memory (CSTM) that momentarily provides rich associated material from long-term memory, permitting rapid chunking (Potter 1993; 2009; 2012). In perception of scenes as well as language comprehension, we make use of knowledge that briefly exceeds the supposed limits of working memory.

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