Investigating the causal relationship between economic growth, inflation, and unemployment in South Korea

Policymakers and economists consistently implement monetary and fiscal policy to control economic growth, inflation, and unemployment due to the fact that these three factors directly influence people’s living standards. Every country has a different economic characteristic structure. Economic growth and inflation have a strong correlation in some countries, while other countries have a strong correlation between economic growth and unemployment. Therefore, investigating the causal relationship among economic factors can provide us with a better understanding of how economic phenomena affect each other. In South Korea, economic growth, inflation, unemployment have been in balance since the 1998 Korean economic crisis. Hence, investigating the economic growth, inflation, and unemployment of South Korea will enlighten how these three economic indicators affect each other in a country that developed rapidly and had several economic crises. To investigate such a model, the Vector Autoregressive Model (VAR) is used with the data between the years 1980 and 2019 in order to verify whether Okun’s law or/and the Philips curve hold in South Korea. The research also determines if there is either a bi-directional or uni-directional relationship if economic growth, inflation, and unemployment have a causal relationship. The research demonstrates that GDP is the main factor in South Korea that influences the other economic factors. This research paper can contribute to academia, since it has a vital outcome which shows that the mobility of the unemployment rate in South Korea is directly correlated to the movement of GDP.

Determinants of Inclusive Growth in the Context of the Theory of Sustainable Finance in the European Union Countries

The aim of the article is to identify a degree of inclusive growth and to examine the influence of determinants of inclusive growth in the European Union (EU-27) countries, with particular emphasis on factors related to the influence of governments and central banks. The study took advantage of the weight correlation method, which was used to build an inclusive growth measure for the EU-27 for the years 2000, 2008, and 2020. For the construction of the inclusive growth rate, 42 factors were selected that affect inclusive growth in the economic, financial, and non-wage area. These determinants are found in the area of the influence of economic authorities, and mainly in the area of authorities responsible for conducting monetary and fiscal policy and general governance. On the basis of the built-up indicator of inclusive growth, it was noticed that among the 27 EU countries in the studied three years, only four countries distinguished themselves with the highest inclusive growth over the last 21 years, these are: Denmark, Luxembourg, Sweden, and Finland. On the other hand, invariably, three countries recorded the lowest inclusive growth, i.e., Bulgaria, Croatia, and Romania. The added value of the structure of the inclusive growth indicator was a possibility to observe which of the three areas: economic, financial, or non-wage, had a significant impact on the position of a given country in the compiled inclusive growth ranking.

ONCE AGAIN ABOUT THE NEGATIVE SYNERGY OF THE DESTRUCTIVE POLICY OF THE RUSSIAN MONETARY AUTHORITIES

The article discloses an interconnected set of strategic defects in the regulatory activities of the Bank of Russia in cooperation with the Ministry of Finance, which predetermine the significant contribution of the neoliberal financial and credit policy pursued by them both to the development of an autonomous recession and the aggravation of the coronary crisis in our country. Based on a comparative analysis of the post-default and post-sanction devaluation of the ruble, a conclusion is made about the predominantly negative impact of the latter on the dynamics of Russian GDP and on inflationary processes in the country. The premature transition of the central bank to inflation targeting and, especially, to the free-floating ruble regime, the leading beneficiaries of which are disclosed commodity exporters, financial speculators and the Ministry of Finance, have been critically examined. The continued dominance of the foreign exchange channel in the Bank of Russia’s issuing activities over the credit channel and the inability of the financial authorities to cover the budget deficit through monetary financing are regarded as decisive factors preventing overcoming the coronavirus crisis on the way to a reasonable diversification of the domestic economy. The unjustified transition already in 2021 to a super-tight monetary and fiscal policy, which does not fit into the global practice of anti-crisis regulation, is seen as a kind of renaissance of the false monetarist approach in the activities of leading Russian regulators, their traditional reliance on the quantitative theory of money and the ensuing desire to overcome cost inflation using methods characteristic of combating demand inflation. As the end result of the noted manifestations of the fiasco of the Russian state in the money market, an extremely low coefficient of monetization of the domestic economy is considered, which prevents its breakthrough high-quality growth in the foreseeable future.

Central Bank Credibility During COVID-19: Evidence from Japan

Japanese realized and expected inflation has been below the Bank of Japan’s two percent target for many years. We use the exogenous COVID-19 pandemic shock to examine the efficacy of monetary and fiscal policy responses for elevating inflation expectations from an arbitrage-free term structure model of nominal and real yields. We find that monetary and fiscal policy announcements during this period failed to lift inflation expectations, which instead declined notably and are projected to only slowly revert back to levels far below the announced target. Hence, our results illustrate the challenges faced in raising well-anchored low inflation expectations.

Assessing the optimality of euro adoption in Romania through shock correlations

The present paper is concerned with the prospect of euro adoption in Romania. The study starts from the relevant literature of the Optimum Currency Areas and identifies the most widely acknowledged meta property and methodological model for this purpose: the SVAR Blanchard and Quah decomposition for identifying the supply and demand shocks. Employing the indicated model and the most recent data, we are able extract and analyse the underlying shocks that hit 34 European economic entities in the period 1995-2019, while also taking into account two crucial structural changes for the Romanian economy – central bank independence and EU accession. After performing the pairwise correlations between Romania and the rest of the economic entities for both the supply and demand disturbances, we map them on a bidimensional graph. We discover that while there is relevant integration and connectedness that ensures relatively high correlations between supply shocks, the politically-motivated monetary and fiscal policy disturbances that created ample and hectic demand side movements, are a factor of great concern for the prospect of single currency adoption in this Eastern European country. The findings support the view that there is room for the conduct of macro policies to become more supportive to the process of euro adoption and that the respect of convergence criteria would help in this respect. To our knowledge, this is the first study performing pairwise shock correlations between Romania and many other European economic entities, while also isolating the effect of post 2005 structural changes.