The Unassuming Economist

From a paper by Samina Iqbal, and Muhammad Faisal Khan:

“Inflation targeting (IT) has emerged as a dominant monetary policy framework adopted by central banks to enhance price stability and macroeconomic credibility. This study empirically examines the impact of inflation targeting on macroeconomic performance, focusing on inflation control, output stability, and economic growth. Using cross-country evidence from inflation targeting and non-inflation-targeting economies, the analysis evaluates whether IT frameworks deliver superior macroeconomic outcomes. The findings suggest that inflation targeting is associated with lower inflation volatility and improved policy transparency, though its effectiveness depends heavily on institutional strength, fiscal discipline, and financial market development. The study contributes to ongoing policy debates by highlighting both the benefits and limitations of inflation targeting in emerging and developing economies.”

From a paper by Muhammad Ramzan Kalhoro, Ameet Kumar, Khine Kyaw, and Pervaiz Ahmed Memon:

“This paper investigates how financial development and institutional quality influence the negative impact of economic uncertainty on economic growth. Using a panel dataset of 32 countries covering the period 2004–2017, the study examines whether the institutional context can mitigate the adverse effects of uncertainty, and through which channels this effect is transmitted. To address potential endogeneity issues, we employ the system-GMM estimation method and margin plot techniques. The overall level of financial development is measured using principal component analysis (PCA). The results show that financial development reduces the negative impact of uncertainty on economic growth through both the investment and consumption channels. Further analysis reveals that access to finance, financial depth, financial stability, and stock market depth all play significant roles in moderating this relationship. In contrast, financial efficiency shows no mitigating effect. Regarding institutional quality, government stability helps to lessen the adverse effects of uncertainty, while bureaucratic quality does not appear to have a significant influence. The findings highlight the importance of institutional context in shaping how uncertainty affects economic growth and contribute to the limited literature on the role of financial development in this relationship. This study also pioneers the analysis of how institutional quality interacts with financial development to influence the uncertainty–growth nexus. From a policy perspective, governments should promote financial system development to cushion the economy against uncertainty, and policymakers should consider the state of financial markets when designing strategies to sustain growth under uncertain conditions.”

From a paper by Dooyeon Cho, and Seunghwa Rho:

“Using survey data on households’ inflation expectations in Japan, this study investigates how the tone of central bankers’ speeches, measured with FinBERT, a domain-specific large language model, affects these expectations across the business cycle. Our findings indicate that a positive tone in central bank communications significantly boosts inflation expectations during recessions by increasing public confidence and promoting beliefs about future inflation. By contrast, during expansions, this positive tone has little impact. We also find that monetary policy shocks do not significantly affect inflation expectations in Japan. Given the country’s unique economic challenges and prolonged deflation, these findings can provide important policy implications for Japan, as managing inflation expectations is critical to its monetary policy. Overall, our results suggest that central bankers’ speeches in Japan play an important role in shaping inflation expectations, particularly during economic downturns, beyond the influence of conventional policy rate adjustments.”

From a paper by Paramita Mukherjee and Dipankor Coondoo:

“Recently several changes have been adopted in the conduct of monetary policy in India, like tracking CPI (Consumer Price Index), targeting inflation and so on. However, certain curious features of inflation may have some implications on the effectiveness of such measures. This article tries to explore the nature of inflation during the last decade. There are certain views about the nature of Indian inflation from the structuralist perspective. This article contributes to the literature by empirically testing those propositions and coming out with some significant policy implications. The article is based on monthly data from January 2006 to March 2016. By employing econometric techniques like cointegration and vector autoregression (VAR), the article tries to explain the movements of different components of WPI (Wholesale Price Index) and CPI inflation, both core and headline inflation and how they are related to macroeconomic policy variables. The empirical analyses focus on finding out the existence of co-movements among the inflation and macroeconomic variables, explaining the role of components like food and fuel price in driving CPI and WPI. The results have some important policy implications. First, the movements of WPI and CPI and their headline and core counterparts are not explained by same set of variables. Second, food inflation is not explained by agricultural output pointing to the insufficient increase in supply in agriculture. Third, the determinants of CPI headline and core inflation are not same. So, both of them should be tracked while formulating policies. The relationship among the components of inflation point to the possibility of some adjustment in demand from one set of goods to another, implying adjustments in terms of relative prices which needs further exploration.”

From a paper by Pulapre Balakrishnan, and M Parameswaran:

“India has seen lower inflation by historical standards for the past 6 years. This has been attributed to the adoption of inflation targeting by the central bank, the Reserve Bank of India in 2016. In particular, it has been asserted that the lower inflation reflects the anchoring of expectations. We evaluate these claims. An econometric investigation indicates that there is no basis to the claim that inflation has been lowered due to the anchoring of expectations. On the other hand, we are able to account for the trajectory of inflation in India after 2016 in terms of an alternative explanation of inflation, namely the structuralist.”