scholarly journals Price Stability and Inflation Targeting in Commodity Economies: Macroeconomics versus a Political Economy?

2018 ◽  
pp. 4-24 ◽  
Author(s):  
Viktor Koziuk ◽  
Keyword(s):  
Inflation Targeting ◽  
Political Regime ◽  
Price Stability ◽  
Economic Stability ◽  
Stability Parameters ◽  
Sovereign Wealth Funds ◽  
Resource Rent ◽  
Poor Countries ◽  
Resource Wealth ◽  
Rich Countries

In this study, the author argues that maintaining price stability in commodity economies is influenced by their resource rent distribution and that economic stability is extremely sensitive to the nature of a political regime. The commodity factor alone is shown not to be an impediment to maintaining price stability and implementing inflation targeting. An empirical analysis based on data from 68 resource-rich countries provides evidence that the link between the timing of the implementation of inflation targeting and resource wealth variables is not skewed towards resource-poor countries. This study finds that among democracies, inflation targeters demonstrate the best price stability parameters, the most flexible exchange rates, more independent central banks, and more diversified economies, while among autocracies, the best parameters are seen in countries that have sovereign wealth funds.

scholarly journals MACROFINANCIAL RESPONSIBILITY OF CENTRAL BANKS: THEORETICAL FOUNDATION AND INSTITUTIONAL DILEMMAS

2018 ◽  
pp. 89-107
Author(s):  
Viktor KOZIUK
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Commodity Prices ◽  
Macroeconomic Policy ◽  
Structural Features ◽  
Political Regime ◽  
Price Stability ◽  
Sovereign Wealth Funds ◽  
Policy Regime ◽  
Rich Countries

Introduction. Prediction that price stability as well as inflation targeting in commodity rich countries is very fragile typically based on logical relation between commodity prices fluctuations and macroeconomic instability. But in the same time, while counter-cyclical instruments appear, commodity prices shock should be taken as supply shock. Thus, inflation instability in resource rich countries should be taken as consequences of macroeconomic mismanagement. Purpose. The purpose of the paper is to validate rejection of fatalism in negative influence of resource richness on price stability. Also it is important to show that inflation targeting regime compatible with large commodities export. In the same time it is necessary to take into account political regime as a supporting factor of adoption that regime of macroeconomic policy that is consistent with price stability. Results. It is proved empirically that commodity abundance per se is not in conflict with price stability. We rich such conclusions basing on simple multifactor regression model that combine macroeconomic policy regime dummies (maturity of inflation targeting, sovereign wealth fund in operation, central bank independence, exchange rate regime) and structural features of the resource rich economies like commodity export, economic complexity, financial depth, democracy. On example of 68 resource rich countries it is shown that price stability parameters (mean inflation, 1999-2017 and standard deviation of it) are not in undoubtfull relation with fraction of nonmerchandise export, but they are in opposite relation with inflation targeting and sovereign wealth funds dummies. Resource endowed countries are not homogenous from political regime point of you. Such regime is important driver of macroeconomic policy choice. Advanced democracies are likely to choose inflation targeting, flexible exchange rate and central bank independence, while wealthy autarkies are likely to prefer fixed exchange rates and sovereign wealth funds. It is mean that price stability is not just vulnerable to commodity factor but is to unstable political regime under which it is hard to implement counter-cyclical regime of macroeconomic policy. Conclusions. Commodity wealth is not precondition to price instability. But political regime is important activate that type of macroeconomic policy regime that consistent with low and stable inflation. By the structural features Ukraine is closer to democracies with mean level of economic complexity and financial depth. Due this inflation targeting regime is more appropriate meaning priority of price stability and exchange rate flexibility.

Resource Wealth and Political Regimes in Africa

2004 ◽  
Vol 37 (7) ◽  
pp. 816-841 ◽  
Author(s):  
Nathan Jensen ◽  
Leonard Wantchekon
Keyword(s):  
Cold War ◽  
Important Determinant ◽  
Political Regimes ◽  
Resource Abundance ◽  
Post Cold War ◽  
Poor Countries ◽  
Resource Poor ◽  
Resource Wealth ◽  
Rich Countries ◽  
Resource Sector

Political economists point to the levels of economic development, poverty, and income inequality as the most important determinants of political regimes. The authors present empirical evidence suggesting a robust and negative correlation between the presence of a sizable natural resource sector and the level of democracy in Africa. They argue that resource abundance not only is an important determinant of democratic transition but also partially determines the success of democratic consolidation in Africa. The results illuminate the fact that post-Cold War democratic reforms have been successful only in resource-poor countries such as Benin, Mali, and Madagascar. The authors argue that resource-rich countries such as Nigeria and Gabon can become democratic only if they introduce strong mechanisms of vertical and horizontal accountability within the state.

Exchange Rate Regimes and Economic Stability

2010 ◽  
pp. 29-43
Author(s):  
S. Smirnov
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Exchange Rate Regime ◽  
Exchange Rate Policy ◽  
Real Sector ◽  
Economic Stability ◽  
Exogenous Shocks ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Managed Floating

The Bank of Russia intends to introduce inflation targeting policy and exchange rate free floating regime in three years. Exogenous shocks absorption which stabilizes the real sector of economy is usually considered to be one of the advantages of free floating exchange rate policy. However, our research based on the analysis of 25 world largest economies exchange rates and industrial production during the crisis of 2008-2009 does not confirm this hypothesis. The article also analyzes additional risks associated with free floating exchange rate regime in Russia and presents some arguments in favor of managed floating exchange rate regime.

Mechanisms of Resource Curse and Economic Policy

2007 ◽  
pp. 4-27 ◽  
Author(s):  
V. Polterovich ◽  
V. Popov ◽  
A. Tonis
Keyword(s):  
Real Exchange Rates ◽  
Resource Curse ◽  
Budget Deficits ◽  
Resource Abundance ◽  
Fuel Prices ◽  
Use Of Resources ◽  
Resource Wealth ◽  
The One ◽  
The Right ◽  
Rich Countries

This paper compares various mechanisms of resource curse leading to a potentially inefficient use of resources; it is demonstrated that each of these mechanisms is associated with market imperfections and can be "corrected" with appropriate government policies. Empirical evidence seems to suggest that resource abundant countries have on average lower budget deficits and inflation, and higher foreign exchange reserves. Besides, lower domestic fuel prices that are typical for resource rich countries have a positive effect on long-term growth even though they are associated with losses resulting from higher energy consumption. On top of that resource abundance allows to reduce income inequalities. So, on the one hand, resource wealth turns out to be conducive to growth, especially in countries with strong institutions. However, on the other hand, resource abundance leads to corruption of institutions and to overvalued real exchange rates. On balance, there is no solid evidence that resource abundant countries grow more slowly than the others, but there is evidence that they grow more slowly than could have grown with the right policies and institutions.

Has the Sovereign Wealth Fund of Azerbaijan (SOFAZ) Been Able to Promote Economic Diversification?

2013 ◽  
Author(s):  
Vahid Yücesoy
Keyword(s):  
Fossil Fuels ◽  
Dutch Disease ◽  
Future Generations ◽  
Direct Control ◽  
Economic Diversification ◽  
Sovereign Wealth Funds ◽  
Sovereign Wealth Fund ◽  
Rentier States ◽  
Oil Revenues ◽  
Rich Countries

Oil-rich countries have oftentimes been confronted with the challenge of diversifying their economies away from oil dependence given the exhaustible nature of these fossil fuels. Investing in sovereign wealth funds has been one of the most ubiquitous ways of preparing for the post-oil period. Investing in sovereign wealth funds rather than directly injecting the oil revenues in the economy not only precludes the outbreak of the Dutch Disease (which is known for giving rise to an exchange rate appreciation, crowding out non-oil industries and keeping the economy reliant on oil), but it also saves for future generations. Yet, in the case of Azerbaijan, the Sovereign Wealth Fund of Azerbaijan (SOFAZ), founded in 1999, has only increased this reliance on oil. Using the rentier states theoretical framework, this paper will argue that the direct control over SOFAZ exercised by the president and the lack of consultation with the NGOs have made corruption easier, making the task of economic diversification more difficult. This has been possible because through corruption the president has often resorted to oil money to buy peace rather than invest it in economic diversification. As a result, since the foundation of SOFAZ, the country is more reliant, not less, on oil.   Full text available at: https://doi.org/10.22215/rera.v8i1.223  

Health and healthcare

2017 ◽  
Author(s):  
Jan Abel Olsen
Keyword(s):  
Production Function ◽  
Strong Association ◽  
International Comparisons ◽  
Healthcare Spending ◽  
Health Production ◽  
Poor Countries ◽  
Health Production Function ◽  
Important Message ◽  
Rich Countries

Chapter 1 provides a contextual frame for the book. An inquiry into the key concepts of health and healthcare is followed by an illustration of the general health production function, that is, the association between increasing healthcare inputs and resulting health outcomes. The important message is the pattern of positive but diminishing effects of healthcare on health: more healthcare improves health, but at a diminishing rate. The production function is also illustrated at the macro level: when considering the poor countries of the world, a strong association is observed between increased healthcare spending and the country’s life expectancy. However, among rich countries we observe a strongly diminishing effect of increased healthcare spending. Some further international comparisons are included to show that the richer a country gets, the higher the proportion of wealth it spends on healthcare.

Governance of Development Assistance: Issues and Challenges

2017 ◽  
Vol 63 (2) ◽  
pp. 252-264
Author(s):  
Navreet Kaur ◽  
Lhoukhokai Sitlhou
Keyword(s):  
Sustainable Development ◽  
Development Process ◽  
Good Governance ◽  
Development Assistance ◽  
Target Population ◽  
Poor Countries ◽  
Disaster Assistance ◽  
Governance Practices ◽  
Bilateral Assistance ◽  
Rich Countries

Good governance emphasises upon efficient and effective institutional mechanism, greater transparency, people’s participation, citizen-centric services and accountability. These reforms are not only limited to national governance practices but also applicable to distribution, disbursement and effectiveness of development assistance. The objective of development assistance is to provide opportunities to needy, deprived and disadvantageous sections of the society. The available data on development assistance clearly demonstrate that rich countries, Development Assistance Countries (DACs) provide financial assistance to poor countries and it has reached US$100 billion in recent years. Non-DAC bilateral assistance (NDBA) is more than US$8 billion in Office of Disaster Assistance (ODA) and US$5 billion annually in country programmable aid (CPA). Private aid (PrA) from DAC members contribute between US$58 billion and 68 billion per year. Total aid flows to developing countries currently amount to around US$180 billion annually. Multilateral aid agencies (around 230) outnumber donors and recipients combined. But the harsh reality is high percentage of illiteracy, high child mortality, gender inequality, prevalence of corruption and exclusion of needy people from the development process. The examination of the process and procedures involved in development process revealed that there are many challenges in the process adopted for allocation, methodological limitations, evaluation limitation, lack of coordination among multiple agencies, political compulsions of donor and recipient countries, transparency, accountability and multidimensional global financial markets compulsions. Certain measures can make development more inclusive and sustainable. Collective efforts of all agencies are the need of the hour to achieve the targets of sustainable development. Coordination among multiple agencies, capacity building of target population and involvement of private agencies in the development process will pave the way for sustainable development.

scholarly journals Financial and economic stability as ‘two sides of a coin’

2015 ◽  
Vol 7 (4) ◽  
pp. 327-353 ◽  
Author(s):  
Muhammad Ali Nasir ◽  
Mushtaq Ahmad ◽  
Ferhan Ahmad ◽  
Junjie Wu
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Financial Stability ◽  
Strong Association ◽  
Price Stability ◽  
Economic Stability ◽  
Data Set ◽  
Content Type ◽  
The Real ◽  
Stability And Instability

Purpose – The purpose of this paper is to provide a different context for considering issues of financial stability and instability, with reference to economic growth and price stability in particular. Design/methodology/approach – This paper pursued an empirical exploration of six pillars of financial stability, based on a data set for the UK extending from 1985 (Q1) to 2008 (Q2), through the construction of a vector error correction model, including an impulse response function analysis. Findings – The findings show a strong association between the financial and economic stability even in a non-crisis regime. This includes, for example, a strong association exists between the stock market and the real economy; exchange rate appreciation may not provide for long-term real economic growth; inflation does not contribute to real economic growth, both the sensitivity of the economy to yields and a significant lag in transitional effects from financial markets to the real sector; a positive role of credit creation within a non-crisis regime; exchange rate appreciation affects purchasing power; and potential points of linkage between sovereign debt activity and general price levels. Research limitations/implications – The findings should be considered in the context of a concept of the economy as fundamentally dynamic and subject to complex cumulative processes. Practical implications – The findings indicate there is a role for state oversight and intervention within a non-crisis regime based on the complexity of possible interactions that may undermine financial and price stability, with consequences for their association with economic growth. Originality/value – The study provides a new perspective for considering issues of financial stability and instability.

scholarly journals Daya Tahan Sektor Rumah Tangga Dalam Rangka Menjaga Stabilitas Sistem Keuangan

2018 ◽  
Vol 5 (1) ◽  
pp. 65
Author(s):  
Ita Rakhmawati ◽  
Suhadi Suhadi
Keyword(s):  
Interest Rates ◽  
Time Series Data ◽  
Negative Impact ◽  
Financial System ◽  
Series Data ◽  
Price Stability ◽  
Economic Stability ◽  
Independent Variables ◽  
High Inflation ◽  
The Stability

The crisis in 1997 is the image of the high rise in inflation in Indonesia. The phenomenon of inflation when it reached 82.40% (Anas, 2006). The early mid-1998 also experienced a weakening of the rupiah against the dollar. Condition stable economy is the desire of each country in comparison with the state of the economy has always fluctuated. Economic stability will create an atmosphere conducive economy. stable climatic conditions in the expected level of welfare is the purpose in each country. One of the efforts to maintain economic stability is through monetary policy. For example, with economic growth, maintain price stability (inflation), the achievement of the balance of payments and the reduction of unemployment (Natsir, 2008). The stability of the financial system of a country of which reflected their price stability, in the sense that there are a great price that can be harmful to society, both consumers and manufacturers that will damage the joints of the economy. However, the implementation of the policy, Bank Indonesia as the monetary authority uses monetary variables such as interest rates and the money supply to cope with economic shocks such as inflation. Besides the need for the government’s role in maintaining the rupiah to avoid turmoil in the economy. The importance of inflation control based on the consideration that the high inflation and unstable negative impact on socio-economic conditions of society. Among the high inflation will cause a decline in the real income of the community so that the standard of living of the people down and eventually make everyone, especially the poor get poorer. From one of the effects of inflation are so wide will impact people’s demands to meet the needs of more and more difficult. Their continuousprice increases being offset by rising income of the communities, it can make sure the Indonesian state would worsen. As a result many people’s needs can not be met, so many things that must be met by way of credit. The number of community needs that must be met will cause world of opportunities for banks to offer credit readily available to meet the needs. The third object of research above (inflation, poverty, and credit) does affect the stability of the financial system? In this study using secondary data from the Badan Pusat Statistik (BPS) and Bank Indonesia (BI) with time series data from the years 2007-2015. The process of data analysis was performed using OLS regression with Eviews 8.0. Based on research, if only partial test of the poverty variable significantly affect the stability of the financial system amounted to 2,023 with α = 10%. Meanwhile, two other variables (inflation and poverty) is not significant to the stability of the financial systemMeanwhile, two other variables (inflation and poverty) is not significant to the stability of the financial system. While the value of R-Square (0.629900), indicating that the three independent variables / free consisting of inflation, poverty and credit simultaneously have the effect that make the stabilization of the financial system increases or decreases. That is jointly independent variables (inflation, poverty and loans) contributed / effect of 62.9% against the stability of the financial system. The rest is the influence of other factors beyond the three independent variables studied.

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