The Unassuming Economist

From a paper by Piotr Palac, and Justyna Tomala:

“The relationship between energy commodity prices and inflation has important implications for fiscal
policy and economic stability. The nature of energy commodities ismulti‑ d imensional, serving both as basic raw materials in production processes and as critical consumer goods. This study focuses on estimating the impact of oil, natural gas and coal prices on inflation in Poland. Through the adoption of multiple regression models using quarterly data from Q2 2000 to Q3 2023, the study aims to estimate the impact of energy commodity prices, particularly oil, coal, and natural gas, on inflation in Poland and to answer the research question: What role do energy commodity prices play in shaping inflation in Poland? The empirical analysis revealed that oil and coal prices significantly influence inflation, reflecting Poland’s energy dependency. Natural gas prices showed a limited impact due to lower consumption and mitigation policy measures. The significant impact of energy prices suggests that energy market developments should be closely monitored for their inflationary potential. The study offers valuable insights for policymakers in their efforts to effectively manage inflationary pressure. The article contributes to the literature by presenting the short‑ r un relationship between inflation and energy commodity prices, covering long period of time with both financial, COVID‑19 crisis and the Russian aggression in Ukraine.”

From a paper by Suzana Cvijanović, Ivan Milenković, Vitomir Starčević:

“The paper compares the economic performance of countries that apply the monetary regime of inflation targeting (IT) and countries that apply alternative monetary regimes in the CESEE (Central, Eastern, and Southeastern Europe) region. The paper aims to assess whether the IT monetary regime has contributed to greater positive effects on economic performance in the group of countries that use inflation targeting as a monetary strategy compared to other groups of countries with alternative monetary strategies. The methodology of comparison was applied, namely the statistical technique Difference in Difference (DID), according to Ball and Sheridan (2005) and Goncalves and Salles (2008). After the introduction of IT, there was a fall in inflation rates (but the significance of IT is artificial) and a reduction in the volatility of inflation and gross domestic product (GDP), leading to a stabilisation of economic growth. The results of the analysis indicate that during the period of analysis (1990–2020), there was an improvement in economic performance after the introduction of inflation targeting in the group of countries that use that monetary strategy, but also in other groups of countries. However, the results show that economic performance is a little better in the group of countries that applied inflation targeting as a monetary regime.”

From a paper by Zaid Tahat:

“This thesis investigates the dynamic linkages among financial, industrial, service, and general
indices of the Amman Stock Exchange (ASE) in Jordan from 2000 to 2020 using a vector
autoregression (VAR) model and by using daily data. The main aim is to provide a
comprehensive understanding of the interrelationships among these key sectors over the 21-year
period. The objectives are to examine both short-term and long-term dynamic linkages, assess
the model’s explanatory power for variations in sector indices, and derive insights for investors
and policymakers.

The study employs a VAR methodology to capture the dynamic interactions among the sector
indices. Daily data on sector indices is analyzed using Granger causality tests, impulse response
functions, and variance decomposition to quantify the linkages.

The findings reveal significant dynamic linkages among ASE sector indices. The VAR model
exhibits high explanatory power, with R-squared and adjusted R-squared values above 99% for
all sectors. Granger causality tests indicate bi-directional causality between the financial and
general indices and between the service and industrial indices. Impulse response functions show
that shocks to each sector have significant effects on the other sectors that persist over several
days. Variance decomposition analysis attributes 27-38% of forecast error variance in each
sector to innovations in other sectors, affirming the importance of intersectoral relationships.
The empirical evidence can inform portfolio diversification and risk management strategies for
investors. For policymakers, the findings underscore the importance of considering spillover
effects in regulatory frameworks governing the financial sector and capital markets.

To mitigate systemic risk and promote stability, policymakers could consider implementing
macroprudential policies such as countercyclical capital buffers, exposure limits, and liquidity
requirements that account for the interconnectedness of sectors. Enhancing transparency through
disclosure requirements and stress testing that incorporate intersectoral linkages could also help
monitor and manage systemic risk. Coordination among regulators overseeing different sectors
may be warranted to address cross-sector vulnerabilities. Overall, a holistic approach that
recognizes the dynamic linkages among sectors is recommended to foster a resilient financial
system.”

From a paper by Hitoshi Hirakawa:

“Since the 1990s, the importance of Information and Communications Technology (ICT)-enabled services/digitally deliverable services has steadily increased along with economic globalization. Until now, the driving force of the world economy has been world trade, mainly in goods. The digital economy has now arrived, with finance, telecommunications, software development, Business Process Outsourcing (BPO), and other service transactions becoming increasingly important, and Artificial Intelligence (AI) and big data becoming the greatest source of competitiveness. On the one hand, this economy has opened the way for some emerging and developing economies to develop through ICT and computer-based digital-based services trade, bringing great expectations to some emerging and developing economies. On the other hand, it has created increasingly difficult catch-up barriers for many developing countries. This chapter identifies the ICT-based services trade that has been the focus of much attention at the turn of the century, and refers to some of the key issues related to the development of emerging and developing economies that have been the subject of much discussion. At the same time, it examines the possibilities and challenges for the development of emerging and developing economies opened up by the development of ICTs.”

From a paper by David Barmes, Irene Claeys, Simon Dikau and Luiz Awazu Pereira da Silva:

“Central banks have made significant progress on incorporating climate risks into their monetary policy frameworks to address the economic and financial challenges posed by climate change. Key developments include conducting climate scenario analyses to evaluate the financial system’s resilience to climate-related risks, exploring how climate change affects price stability and monetary policy transmission, integrating climate variables into forecasting frameworks, fostering collaboration through initiatives like the Network for Greening the Financial System (NGFS) and, in some cases, integrating sustainability considerations into monetary operations such as collateral frameworks and quantitative easing programmes. Despite this progress, a critical area remains underexplored: the challenges that inflation-targeting central banks may face if confronted with more frequent, persistent and severe climate-related supply shocks.

Unlike demand shocks, supply shocks create trade-offs for central banks and, unlike transitory supply shocks, persistent supply shocks can lead to a systematic and prolonged overshooting of inflation targets and undermine long-term macroeconomic stability. A small number of senior figures in the central banking community have recently begun to highlight the risks of a future of intensified supply-side volatility (Brainard, 2022; Schnabel, 2023; Maechler, 2024; Bénassy-Quéré, 2024). Building on these analyses, this report aims to spark a policy discussion on adaptive inflation targeting, with a view to equipping central banks with a framework, analysis and toolkit that enables them to better navigate these supply-side disruptions. To maintain credibility and ensure the smooth implementation of possible changes to existing inflation-targeting regimes, central banks must communicate these changes clearly in times of relative stability when inflation is at or around target.”