The Unassuming Economist

From a paper by Harold Glenn A. Valera, Cymon Kayle Lubangco, and Mark J. Holmes:

“We propose a new measure of revisions to consumer inflation expectations using repeated cross-sections rather than requiring panel data. We calculate the value of group average expectations in a prior period as a proxy for what an individual’s expectations might have been using micro data in the Philippines for Q1 2010 to Q2 2024. In contrast to existing mixed evidence, the resulting revisions show sensitivity to price changes in 14 food and energy goods. The equivalence testing finds that the group-based coefficients are valid, as they are: (a) different from an overall sample average-based revision results with Philippine data and (b) similar to rotating panel-based revision results using data from the Michigan Survey of US households. Using Philippine data, we also provide new evidence of significant effects of a firm’s frequency of price changes on expectation revisions.”

From a paper by Borivoje D. Krušković:

“Many central banks adopted inflation targeting under pressure from the IMF. Adoption of inflation targeting happened on pretty favourable macroeconomic terms whose distinctive features were the absence of supply shocks, low budget deficit and foreign currency access. It was a ‘period conducive to price stability’ with inflation on a downward trajectory in many countries, especially developed ones, even before the introduction of inflation targeting. That could have contributed to efficiency of inflation targeting considering other monetary strategies. The most widely used model in designinig monetary policy under inflation targeting is a macroeconomic model of a small open economy from the group New Keynesian model. The results of the econometric analysis in this paper show that inflation targeting is an inefficient monetary strategy in the face of negative supply shocks (financial crises, pandemic, rising energy prices, tariffs), as it leads to rising interest rates, falling GDP, and rising unemployment. The results of the econometric analysis in this paper show that inflation targeting is an inefficient monetary strategy in the face of negative supply shocks (financial crisis, pandemic, rising energy prices, tariffs, etc.), which leads to rising interest rates, falling GDP, rising unemployment, and ultimately to an “inflationary pandemic”.

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.”