...Between Exchange Rate and Inflation in Pakistanby Shagufta KashifAbstractThere has been a long-standing interest in studying the factors that are responsible for uneven vacillation in the stable growth of the world economies. Lots and lots of theoretical literature and empirical evidences have addresses this issue in the past. Hike in prices of goods and services and foreign exchange are two important aspects which are deemed responsible for such potholed fluctuations in the economic growthThe volatility of the nature of prices is a major source of concern in all countries since 1970s. The issue is of a more serious nature in the developing countries where inflation in foreign countries known as “imported inflation” is seen to be driving “local/domestic inflation”; making domestic policies to control inflation ineffective. Similarly, in Pakistan, the domestic price level rose from the mid-1970s. The exchange rate started depreciating continuously from the early 1980s. Continuous devaluation of currency and inflation in the 1980s seems to suggest a correlation between the two variables.The studies by Rana and Dowling (1983) suggest that foreign inflation is the most influencing factor in explaining the change in local price level in nine less-developed countries of Asia during the period 1973-79. This study suggests that these countries cannot exercise much control over domestic inflation, however, the policies of their major trading partners (through exchange rate) had a significant...
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...------------------------------------------------- INFLATION TARGETING AND INTEREST RATE RULES A Project Report by: November 23, 2015 Group #3 Section E November 23, 2015 Group #3 Section E Kaustubh (PGP/19/264) Kavya (PGP/19/265) Kunal (PGP/19/266) Madhu (PGP/19/267) Madhur(PGP/19/268) Contents Introduction ------------------------------------------------------------------------------------------------------ 2 INFLATION TARGETING USING TAYLOR TYPE OF RULES -------------------------------------------- 2 RATIONALE FOR INFLATION TARGETING IN INDIA ----------------------------------------------------- 3 RATIONALE FOR NOMINAL GDP TARGETING IN INDIA ------------------------------------------------ 3 Introduction Inflation is increased money supply, and often causing a sustained increase in the general price level of goods and services in an economy over a period of time by "Too much money chasing too few goods", as common acknowledge by modern people. Inflation is of primarily four types – hyperinflation, disinflation, deflation and stagflation. Hyperinflation involves high growth of money supply i.e. in multiples of 100 and usually occurs when central bank is involved in excess money printing. Disinflation involves inflation that is growing at a decreasing rate. Deflation or negative inflation is decrease in money supply. Stagflation occurs when high growth in prices coincides with decelerated growth and unemployment. Inflation is measured using indices namely, CPI...
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...International Journal of Social Economics Inflation in Malaysia Ming-Yu Cheng Hui-Boon Tan Article information: Downloaded by Universiti Teknologi MARA At 00:03 28 September 2015 (PT) To cite this document: Ming-Yu Cheng Hui-Boon Tan, (2002),"Inflation in Malaysia", International Journal of Social Economics, Vol. 29 Iss 5 pp. 411 - 425 Permanent link to this document: http://dx.doi.org/10.1108/03068290210423532 Downloaded on: 28 September 2015, At: 00:03 (PT) References: this document contains references to 26 other documents. To copy this document: permissions@emeraldinsight.com The fulltext of this document has been downloaded 16001 times since 2006* Users who downloaded this article also downloaded: Ahmad Zubaidi Baharumshah, Siew-Voon Soon, (2014),"Inflation, inflation uncertainty and output growth: what does the data say for Malaysia?", Journal of Economic Studies, Vol. 41 Iss 3 pp. 370-386 http:// dx.doi.org/10.1108/JES-05-2012-0073 Chor Foon Tang, (2011),"An exploration of dynamic relationship between tourist arrivals, inflation, unemployment and crime rates in Malaysia", International Journal of Social Economics, Vol. 38 Iss 1 pp. 50-69 http://dx.doi.org/10.1108/03068291111091963 George B. Tawadros, (2009),"Testing the impact of inflation targeting on inflation", Journal of Economic Studies, Vol. 36 Iss 4 pp. 326-342 http://dx.doi.org/10.1108/01443580910973556 Access to this document was granted through an Emerald subscription provided...
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...Relationship between Real Interest Rates and Inflation Michał Brzoza-Brzezina* Abstract In the recent decade, a huge amount of papers, describing monetary policy rules based on nominal interest rates, has been written. As it is, however, well known, it is in fact the real and not the nominal interest rate, that can influence spending decisions of enterprises and households and thus inflation. One way, to describe the relationship between real interest rates and inflation, is based on our experience with the monetary theory of the price level. The quantity theory of money can be used under certain assumptions as a good description of the long-run relationship between money and prices. In this respect the best known empirical application is probably the P-star model of Hallman, Porter and Small (1991). In this paper we use two simple descriptions of the long run link between real interest rates and inflation, and subsequently test their empirical performance, using similar techniques as employed in P-star modeling. In an empirical study, based on cointegration analysis, we show that the gap between the real and natural rate of interest does not determine inflation, as it is often postulated, but its growth rate. We find that this relationship describes reasonably well the long run influence of the interest rate gap on inflation. Simultaneously we calculate the average natural rate of interest. JEL: E31, E40. Keywords: Inflation, Natural Rate of Interest *) Research Department...
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...A Study of Impact of RBI policy rates on inflation *Prof. Pallavi Ingale Introduction The Reserve Bank of India (RBI) is the Indian central bank. The RBI’s most important goal is to maintain monetary stability - moderate and stable inflation in India. The RBI uses monetary policy to maintain price stability and an adequate flow of credit. Rates which the Indian central bank uses for this are the bank rate, repo rate, reverse repo rate and the cash reserve ratio. The Reserve Bank of India (RBI) raised repo and reverse repo rates 13 times in previous year. RBI also deregulated savings bank deposit rate with immediate effect. This step was taken to arrest rising inflation in Asia's third largest economy. But this RBI's decision to hike short-term lending and borrowing rates could lead to higher interest rates and impact the growth momentum of the economy. An Indian company has postponed expansion plans and review future profitability projections after the Reserve Bank of India raised key interest rates. The central bank also revised the GDP growth rate for FY11-12 to 7.6% from the earlier 8%, while the projection of WPI inflation has been kept unchanged at 7% for March 2012. Reserve Bank of India (RBI) The Reserve Bank of India was inaugurated as on April 1 1935. Originally, the Reserve Bank was constituted as a shareholders’ bank based on the model leading foreign central banks on that time. The bank ‘s fully paid share capital was Rs. 5 Crores divided into shares of Rs. 100 each...
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...Topic: China’s five year inflation rate from 2007 to 2012 Content 1. Introduction ------------------------------------------------------------------------P5 2. Inflation rate of China over the last 5 years ----------------------------P5, 6, 7 -Definition of the concept -----------------------------------------------------P5, 6 -Performance over the last 5 years-----------------------------------------P6, 7 3. Impacts of the future economic performance ----------------------------P7, 8 4. Other relevant issues and discussion--------------------------------------P8, 9 5. Conclusion --------------------------------------------------------------------------P10 6. References--------------------------------------------------------------------P10, 11, 12 1. Introduction In today’s world, inflation this word keep appearing in our lives. From newspaper, television, internet etc. Now a day more and more people taking about the inflation. Not only because of the inflation keeping appear in our live, but also the people know more about the inflation than before. Few years ago, most of people do not know what inflation is and what it can do with our live. But today, this has been changed with the development of social and the growth of the economic. In the past people can only see inflation this word in some report. And most of the people do not understand about the inflation. Nowadays people already know what the inflation represents. By the news...
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...Effect of RMB Exchange Rate on China’s Inflation Contents Chapter 2 Literature review 3 2.1 Introduction 3 2.2 Exchange rate pass-through effect 3 2.2.1 Narrowly defined exchange rate pass-through effect 3 2.2.2 Broadly defined exchange rate pass-through effect 4 2.2.3 Complete and incomplete exchange rate pass-through 5 2.3 Relevant theories of exchange rate pass-through 7 2.3.1 Theory of complete exchange rate pass-through 7 2.3.2 Theory of incomplete pass-through 9 2.4 Empirical research on exchange rate pass-through 13 2.5 Summary and reflection 16 Reference 19 Chapter 2 Literature review 2.1 Introduction This chapter reviews the theoretical and empirical researches on exchange rate pass-through effect. Specifically, this chapter firstly introduces the definition of exchange rate pass-through effect, incomplete and complete exchange rate pass-through. Then, this chapter analyses the theory of exchange rate pass-through effect, with focus on the reasons for the common incomplete exchange rate pass-through effect. After theoretical analysis, this chapter reviews and analyses the empirical research on exchange rate pass-through effect. A major part in this section is the review of the perspective and method for analysing exchange rate pass-through effect. Empirical researches generally referred to McCarthy (2000)’s research method, used VAR model, and selected specific area and time window data to empirically analyse exchange rate pass-through via price...
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...China may lean more on interest rate rises to fight inflation http://economictimes.indiatimes.com/news/international-business/china-may-lean-more-on-interest-rate-rises-to-fight-inflation/articleshow/9195508.cms Fighting inflation while keeping the domestic currency weak to stimulate exportation is a very prominent problem that most likely every policymaker would rather choose not to handle. It is known that an increase on interest rate would have various economic effects such as of the increase of government debt’s interest payments that would lead to higher taxes in the future, increase of incentive to save in a deposit account due to interest gained, increases the cost of borrowing that will lead to the fall of other areas of consumptions, increase in mortgage interest payments that will have a significant impact on personal disposable income, and most of all raised interest rate will increase the value of the domestic currency, which in case of China becomes unfavorable being an export-driven country. As being called by China “its most prominent problem”, the increase in interest rate was seen widely appealing to US policymakers who has been accusing China of maintaining low interest rates to keep yuan low and exports cheap. Though the said action is considered as Chinese authority’s way of balancing their economy it certainly may speculated that the US and China are in some sort of a deal. The move follows a clear need by the Chinese authorities to take out some of...
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...referred to as economic business cycles. The gross domestic product, or GDP, is the total market value of goods and services the country produces. As the economy goes through business cycle changes, these positively or negatively affect the GDP. Economic Contraction During a contraction, economic output slows, usually due to decreased demand for products and services, an increase in the cost of raw materials or both. This means that companies are not making as many products or offering as many services. As a result, companies will begin to lay off employees and the unemployment rate begins to rise. Since GDP is a measure of the value of economic output and during a contraction output decreases, the GDP also decreases. Even though the GDP decreases during a contraction, it is still positive. Economic Trough An economic trough occurs after a contraction. A historically high national unemployment rate and low economic output usually mark this trough, which often signals that the economy is already in or heading toward a recession. Unlike a contractionary phase in which the GDP decreases but is still positive, during a trough the GDP is negative. A negative GDP means that economic output does not grow at all. Economic Expansion After the "rock bottom" of an economic trough, expansion is its recovery. If the economy grows for two or three consecutive calendar quarters, it indicates that it is beginning its recovery and GDP begins to increase. The reason economists do not consider...
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...and Nancy wanted their child to be able to choose among an array of public or private colleges with good academic reputations. A recent newspaper article had indicated that the average tuition, room, and board at private four-year institutions was about $15,000 per year. They felt that if their child were entering college this coming fall, $18,000 per year for tuition, room, and board would provide the range of choice they sought. Questions: 1. In the recent past, college fees had been increasing at about 8 percent per year. Because this rate of increase exceeded the general inflation rate, Paul and Nancy felt it would decline to a level closer to measures of general inflation, such as the Consumer’s Price Index. Thus, they decided to assume that college fees would increase 6 percent per year. At this rate, how much will one year of college cost 18 years from this fall. In 18 yrs, present tuition of 18,000 per year, at an inflation rate of 6%, will be...
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...increase in fees through the four years of college. Ideally, Paul and Nancy wanted their child to be able to choose among an array of public or private colleges with good academic reputations. A recent newspaper article had indicated that the average tuition, room, and board at private four-year institutions was about $15,000 per year. They felt that if their child were entering college this coming fall, $18,000 per year for tuition, room, and board would provide the range of choice they sought. Questions: 1. In the recent past, college fees had been increasing at about 8 percent per year. Because this rate of increase exceeded the general inflation rate, Paul and Nancy felt it would decline to a level closer to measures of general inflation, such as the Consumer’s Price Index. Thus, they decided to assume that college fees would increase 6 percent per year. At this rate, how...
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...Introduction Grade inflation has been a subject of debate and concern for several years. Grade inflation is “Oversupply of higher grades” (Kassahun, 2008, p. 33). It simply means ''an increasing proportion of excellent grades scored by college students without evidence of a concurrent increase in their actual performance'' (Kassahun, 2008, p. 33). There are several reasons that could contribute to the grade inflation, some of which are considered to be sin. Achen and Courant (2009) point out continuing increases in average grades have been widely documented in many universities over the several decades. They concur systematic differences in grade levels by field of study is associated with grade inflation. Achen and Courant (2009) argue, they find it difficult to explain persistence of these relative differences than persistence of modest grade inflation in general. The article was primarily focussed to understand these differences, by analysing the detailed data they had from College of Literature, Science, and the Arts (LSA) at the University of Michigan. Achen and Courant (2009) study was limited to Michigan’s College of Literature, Science, and the Arts (LSA) with 16000 students. LSA provides the basic science and math courses to students in the College of Engineering, which is the second-largest undergraduate College at Michigan. The data is from 25 departments from Fall 1992 through Winter 2008. Main claims and evidence or arguments used in the article Achen and Courant...
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...and States/UTs separately for rural, urban and combined every month with effect from January, 2011. Provisional indices for the month of February 2014 and also final indices for January 2014 are being released hereby for all-India and for States/UTs. All India provisional General (all groups), Group and Sub- Group level CPI numbers for February 2014 for rural, urban and combined are given in Annex I. The General Indices for rural, urban and combined are 139.0, 135.3 and 137.4, respectively. Provisional annual inflation rate based on all India general CPI (Combined) for February 2014 on point to point basis (February 2014 over February 2013) is 8.10% as compared to 8.79% (final) for the previous month of January 2014. The corresponding provisional inflation rates for rural and urban areas for February 2014 are 8.51% and 7.55% respectively. Inflation rates (final) for rural and urban areas for January 2014 are 9.35% and 8.09% respectively. Inflation for specified categories is indicated at Annex II. State/UT-wise General provisional CPI numbers for rural, urban and combined are at Annex III. State/ UT wise Group level provisional indices are available in the Ministry’s website (www.mospi.gov.in). Price data are collected from selected towns by the Field Operations Division of NSSO and from selected villages by the Department of Posts. Price data are received through web portals being maintained by the...
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...PESREL analysis of entertainment and media industry http://www.studymode.com/essays/Pesrel-Analysis-Of-Entertainment-And-Media-44826994.html What is the political situation of the country and how can it affect the industry? Tax and tariff: Market entry barriers: EU market entry policy: What are the prevalent economic factors? Inflation: a rise in the inflation rate of any economy would affect the way companies’ price their products and services. Adding to that, it would affect the purchasing power of a consumer and change demand/supply models for that economy. Impact of development of Internet: Impact of develop of computer games: Impact of declining power of TV programme: Impact of diverse distribution: Impact of decline of CD industry: Impact of increasingly competitive environment of family entertainment industry: Foreign exchange rates: between Belgium, US and Germany FDI policy: How much importance does culture has in the market and what are its determinants? Ethic issue related to TV programme: Changes in lifestyle of people: Acceptance for culture from other country: What technological innovations are likely to pop up and affect the market structure? Refers to automation, research and development and the amount of technological awareness that a market possesses. Are there any current legislations that regulate the industry or can there be any change in the legislations for the industry? These factors have both external and internal...
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...CASE STUDY H&M WORKPLACE Fire safety is a major issue in Bangladeshi garment factories. Poor electrical installations and bad maintenance often create significant fire hazards. In order to make a safe workplace the norm throughout the sector, we think that it is essential to involve all stakeholders such as the government, industry organisations, trade unions and other brands. This is why we developed two training films to increase fire safety awareness amongst employees at all levels in garment factories. We teamed up with 18 other brands and employer associations in the sector, BGMEA and BKMEA, to spread this training. According to BGMEA, more than 1,250 factories and 100,000 workers received the training. Based on a study that we conducted in 2011, we raised the concern of lapsed fire-safety licenses with the Government of Bangladesh and engaged the Bangladeshi University of Engineering and Technology as well as a specialist to assess the electrical installation in four factories. These assessments were finalised in spring 2012 and their results were presented to concerned stakeholders at a seminar in Dhaka. The most common shortcomings in regards to electrical safety such as poor-quality materials, poor maintenance and lack of proper electrician training were discussed. During the seminar, a number of actions were proposed, including introducing stricter legislation and inspections. In order to set a good example, we have stipulated that all our supplier factories...
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