The Unassuming Economist

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.”

From a paper by Abdullah Gülcü, Erdal Özmen and Fatma Tasdemir:

“This study aims to explore the nonlinear impact of financial integration on income inequality in advanced (AE) and emerging market and developing economies (EMDE). Our panel fixed effect threshold estimation results suggest that international financial integration (IFI) provides a data-driven estimated threshold for the effect of IFI on income inequality. IFI is positively associated with inequality in EMDE, albeit this positive relation diminishes in more financially integrated episodes. In AE, inequality decreases with IFI in less financially integrated episodes. Our empirical findings reveal that the relationship between IFI and inequality is driven by both capital inflows and outflows in AE while it is determined by capital inflows in EMDE. Finally, we investigate whether the impact of IFI on inequality changes with the level of financial development. Our results also suggest that the inequality-increasing effect of IFI is much lower in financially more developed episodes in EMDE. All these findings imply that policies fostering financial development and equitable financial access are crucially important to mitigate the adverse effects of IFI on inequality, especially in EMDE.”

From a paper by Gokcen Ogruk Maz, Sinan Yildirim, Mjellma Carabregu-Vokshi, and But Dedaj:

“This study examines the effect of inflation targeting adoption on stock market capitalization in 39 developing countries from 1995 to 2023. Baseline propensity score matching with two-way fixed effects shows positive but sometimes insignificant effects. Robustness checks excluding the 2008–2009 Global Financial Crisis, hyperinflation episodes, and both combined often yield larger and more significant estimates. To address concerns about staggered policy adoption, we use the Staggered Difference-in-Differences estimator, finding that significance emerges five to ten years after adoption. Results suggest IT supports financial development by enhancing investor confidence and macroeconomic stability, especially in lower-volatility environments.”

From a paper by Gabriel Caldas Montes, Helder Ferreira de Mendonça, and Matheus Rosa Ribeiro:

“Fiscal transparency is essential for the expectations formation process, as governmental fiscal opacity often leads to forecast errors due to insufficient information. This study examines the relationship between fiscal unpredictability, particularly related to the primary budget, and the lack of consensus in expectations for external sector variables in Brazil. Specifically, based on several regression models considering different expectations horizons, we investigate whether fiscal opacity generates a lack of consensus in expectations for the trade balance, foreign direct investment and exchange rate. Additionally, we propose a composite indicator for the lack of consensus in external sector expectations derived from principal component analysis of related variables. The findings indicate that fiscal opacity increases the lack of consensus in expectations for the external sector. In brief, our results highlight the need for greater fiscal transparency to reduce uncertainty and improve consensus in economic expectations, particularly in expectations for external sector variables.”