The Unassuming Economist

From a paper by Knut Are Aastveit, Hilde C. Bjørnland, Jamie L. Cross and Helene Olsen Kalstad:

“After decades of a stable environment with low inflation in most advanced economies, global inflation rates surged unexpectedly during the pandemic and have remained elevated since. This paper demonstrates that inflation expectations have significantly amplified the global demand and supply shocks triggered by the pandemic, playing a crucial role in sustaining elevated inflation in the post-pandemic regime. We establish this finding by applying a structural vector autoregression model that includes various shocks to global demand and supply, along with domestic inflation and inflation expectations, across six economies: the United States, Canada, New Zealand, the Euro area, the United Kingdom, and Norway. First, we document that global demand and supply shocks in the oil market, as well as disruptions in global supply chains, have been major drivers of the recent inflation surge in all these economies. Then, through various counterfactual exercises, we demonstrate that inflation expectations generally amplify the transmission of global shocks to inflation — particularly in Canada, New Zealand, and the US during the post-pandemic period. As a result, managing inflation expectations should remain a crucial policy objective to mitigate their amplifying effects on inflation.”

From Caixin Global:

“Recent weeks have seen a flurry of multilateral diplomacy across South America. The 31st APEC Economic Leaders’ Meeting in Lima, Peru, and the 19th G20 Summit in Rio de Janeiro, Brazil, convened global leaders, including President Xi Jinping. The theme of the APEC meeting was Empowering, Inclusive, Growth, while the G20’s Rio Declaration emphasized fostering “strong, sustainable, balanced, and inclusive growth,” with the term “inclusive” appearing at least 10 times. This shared emphasis reflects a pressing global reality.”

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From a paper by Azzeddine Cheddad and Mohammed Mekidiche:

“This article analyzes the feasibility of inflation targeting (IT) in Algeria using data from Q1 2000 to Q4 2021. IT is widely used, although its efficacy in emerging areas, notably MENA, is disputed. Algerian monetary policy dynamics and the central bank’s response to inflation and production changes are examined using Taylor Rule and GMM. The Bank of Algeria appears to value interest rate smoothing above short-term economic instability. The central bank’s aggressive response to inflation goal deviations supports its price stability promise in an IT environment. The research shows a lower focus on production stability, possibly due to the oil-dependent economy and labor market rigidities. The study finds that Algeria’s monetary policy has IT aspects, but its efficacy depends on its economic setting and institutional architecture. To further comprehend Algeria’s macroeconomic stabilization efforts, future study should examine global economic circumstances, commodity price volatility, and monetary and fiscal policy. This study adds to the discussion on IT’s usefulness in emerging economies by highlighting the necessity to address economic conditions and institutional frameworks. IT may help stabilize prices in Algeria, but executing this monetary policy framework in a unique economic setting is difficult.”

From Daily Excelsior:

“Leaders from various Indian-American communities have applauded Prime Minister Narendra Modi for his commitment to “inclusive growth” in India.

At the half-day Global Equity Alliance Summit, hosted at Washington Adventist University on Friday, the leaders said the minority communities in India has remained safe and secure under Modi’s governance.
The summit, held in association with the Indian Minorities Foundation and Chandigarh University, also saw the launch of the Association of American Indian Minorities. The initiative was launched against the backdrop of a series of attacks on Hindu temples in the US and Canada this year.

In recognition of Modi’s efforts towards inclusive development and minority welfare, the Washington Adventist University and the Association of American Indian Minorities honoured the Prime Minister with the Dr Martin Luther King Jr Global Peace Award for Minority Upliftment.
Chandigarh University Chancellor Satnam Singh Sandhu received the award on Modi’s behalf in his absence.

The association’s goal is to unite minorities in the country and work for the safety and security of Indian American minorities, according to the organisers here.”

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From a paper by Peter Lihn, Jørgensen, and Kevin J. Lansing:

“We show that the fraction of non-reoptimizing firms that index prices to the inflation target, rather than lagged inflation, provides a simple measure of anchoring for short-run expected inflation in a New Keynesian model with full-information rational expectations. Higher values of the anchoring measure imply less sensitivity of rational inflation forecasts to movements in actual inflation. The approximate value of the model’s anchoring measure can be inferred from observable data generated by the model itself, as given by 1 minus the autocorrelation statistic for quarterly inflation. We show that a shift in the collective indexing behavior of firms allows the model to account for numerous features of evolving U.S. inflation behavior since 1960.”