The Unassuming Economist

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.”

From a paper by Julien Pascal:

“This paper provides a comprehensive review of the fast-expanding literature on household heterogeneity in macroeconomic models. It not only examines the main mechanisms through which household heterogeneity affects the transmission of monetary policy, but also offers a unified framework for understanding the main analytical and numerical approaches used to solve macroeconomic models with heterogeneity. These include limited-heterogeneity, history-truncation, and no-trade equilibria on the analytical side; forecasting-rule, linearization (state-space or sequence-space), and global methods on the numerical side. By highlighting the links and trade-offs among these approaches, the paper provides guidance for selecting appropriate solution techniques depending on the structure and purpose of the model.”