inflation variability and the turkish economy the present paper investigates the effects of inflation variability on the level of economic activity in turkey during 1981 3 1989 12 by employing a seven variable vector autoregressive var model including the money supply interest rate real exchange rate price level a measure of inflation variability output and the trade balance the empirical findings indicate that while the output the money supply and the real exchange rate respond negatively to a shock to inflation variability the trade balance and the interest rate respond positively the responses are usually significant at the initial stages and they level off after six months

dual exchange rates in europe and latin america this article uncovers some important empirical regularities surrounding the operation of formal dual exchange rates in europe and latin america in the 1970s and 1980s although there are some parallels between the european and latin american experiences there are also interesting differences in terms of the size and nature of the distortion created by two official exchange rates the response of the distortion to foreign interest rates real commercial exchange rates and domestic budget deficits and the motives for adopting this exchange rate regime empirical work on dual exchange rate regimes is made difficult by the transitory nature of these regimes and by frequent changes in institutional practices

is wti crude oil market becoming weakly efficient over time new evidence from multiscale analysis based on detrended fluctuation analysis abstract this paper extends the work in tabak and cajueiro are the crude oil markets becoming weakly efficient over time energy economics 29 2007 28 36 and alvarez ramirez et al short term predictability of crude oil markets a detrended fluctuation analysis approach energy economics 30 2008 2645 2656 in this paper we test for the efficiency of wti crude oil market through observing the dynamic of local hurst exponents employing the method of rolling window based on multiscale detrended fluctuation analysis empirical results show that short term medium term and long term behaviors were generally turning into efficient behavior over time however in this way the results also show that the market did not evolve along stable conditions for long times multiscale analysis is also implemented based on multifractal detrended fluctuation analysis we found that the small fluctuations of wti crude oil market were persistent however the large fluctuations had high instability both in the short and long terms our discussion is also extended by incorporating arguments from the crude oil market structure for explaining the different correlation dynamics

inventories rational expectations and the business cycle abstract the simplest macroeconomic models in which markets clear instantaneously and expectations are rational preclude the existence of business cycles that is of serially correlated deviations of output from trend this paper studies one of several mechanisms that can be used to make these so called new classical models produce business cycles the mechanism is the gradual adjustment of inventory stocks two macroeconomic models of inventory holdings are formulated both imply first that current output should be a decreasing function of the stock of inventories and second that inventories once perturbed from equilibrium levels should adjust only gradually these two features are then embedded into an otherwise standard macroeconomic model in which markets clear instantaneously and expectations are rational two principal conclusions are reached first disturbances such as unanticipated changes in money will set in motion serially correlated deviations of output from trend second if desired inventories are sensitive to the real interest rate then even fully anticipated changes in money can affect real variables

the relationship between the inflation rate and its variability the issues reconsidered this paper empirically reexamines the hypothesis of a positive relationship between the inflation rate and its variability the sample consists of 66 countries for the 1955 85 sample period using pooled cross section time series data empirical tests are performed for nine different country groupings ranging from the g 7 developed countries to a group of 10 developing asian countries several important conclusions can be derived first irrespective of the variability measure employed the results indicate the presence of a significant positive relationship between the inflation rate and its variability this provides strong support to okun s hypothesis second this relationship is stronger during the flexible rather than the fixed exchange rate period third there appears to be an optimum zone of inflation rate within which the predictability of inflation is at its highest and hence uncertainty cost is at its lowest for the 1955 85 sample period this optimum zone of average inflation rate lies in th

time varying predictability in crude oil markets the case of gcc countries abstract this paper uses a time varying parameter model with generalized autoregressive conditional heteroscedasticity effects to examine the dynamic behavior of crude oil prices for the period february 7 1997 january 8 2010 using data from four countries of the gulf cooperation council we find evidence of short term predictability in oil price changes over time except for several short sub periods however the hypothesis of convergence towards weak form informational efficiency is rejected for all markets in addition we explore the possibility of structural breaks in the time paths of the estimated predictability indices and detect only one breakpoint for the oil markets in qatar and the united arab emirates our empirical results therefore call for new empirical research to further gauge the predictability characteristics and the determinants of oil price changes

inflation and currency reform expectations of currency reform are explicitly incorporated into a rational expectations version of the cagan model of money market equilibrium where expectations about the timing of reform are lerived from a simple government rule for choosing when to reform the currency the model is estimated for three of the episodes of hyperinflation that cagan investigated and the results support the hypothesis that expectations of reform were responsible for the apparent instability of the demand for money during the final months of these hyperinflations

testing for rational bubbles with exogenous or endogenous fundamentals the german hyperinflation once more abstract the presence of rational price bubbles during the german hyperinflation is tested under two different structural assumptions on the money process if the money supply is constrained to be exogenous to the current inflation rate the hypothesis of no bubble can be rejected however this is no longer found to be true when a feedback rule from inflation to money creation is allowed the analysis contradicts previous results presented in the literature

government expenditure and the dynamics of high inflation abstract this paper develops a dynamic model of inflation where the money supply is determined by the government s use of newly created money to finance its budget deficit in turn the government s deficit is influenced by past inflation rates that reduce the real value of tax receipts while the money supply and the budget deficit are modeled as endogenous government expenditure is assumed to be exogenously determined by the policymaker changes in fiscal policy are allowed by modeling expenditure as an autoregressive process subject to discrete switches in regime agents are conjectured to have access to a larger set of information than the researcher this additional information is incorporated in the rate of inflation through the agents money demand decision the econometrician constructs probability assessments concerning the regime of the spending process at every point in time and refine his her inferences by exploiting the structural relationship between inflation money growth and government expenditure

toward efficiency in the crude oil market the official opec prices of crude oil before the collapse in the oil market in the mid 1980s can be interpreted as contract prices and analysed on the basis of the theory of futures or forward markets this paper uses the generalized method of moments estimation technique to test for efficiency in the relationship between the official prices and the ex post spot prices at the time of delivery efficiency is rejected for the sample period 1978 1985 as a whole but evidence is found of improvements over time further the gmm wald and hansen tests although asymptotically equivalent are shown to differ greatly when applied to a small sample of monthly oil price data

time consistency indexation and the costs of inflation abstract we examine the effects of indexation measures on inflation costs of inflation and economic welfare within the barro gordon journal of political economy 1983 91 589 610 model the main result is that wage indexation in addition to making the phillips curve steeper also reduces the marginal cost of inflation which is inflationary

some macro implications of risk using the capital asset pricing model as the financial sector of a conventional rational expectations macro model an increase in expected inflation reduces the long run capital stock contrary to the usual result this occurs because the induced fall in real balances increases equity s share in the market raises equity s beta and discount rate and reduces investment increases in the variance of disturbances to aggregate demand reduce the capital stock while increases in the variance of inflation raise the stock a proportionate increase in both variances reduces the captial stock copyright 1987 by ohio state university press

the efficiency of the crude oil markets evidence from variance ratio tests this study examines the random walk hypothesis for the crude oil markets using daily data over the period 1982 2008 the weak form efficient market hypothesis for two crude oil markets uk brent and us west texas intermediate is tested with non parametric variance ratio tests developed by wright j h 2000 alternative variance ratio tests using ranks and signs journal of business and economic statistics 18 1 9 and belaire franch j and contreras d 2004 ranks and signs based multiple variance ratio tests working paper department of economic analysis university of valencia as well as the wild bootstrap variance ratio tests suggested by kim j h 2006 wild bootstrapping variance ratio tests economics letters 92 38 43 we find that the brent crude oil market is weak form efficiency while the wti crude oil market seems to be inefficiency on the 1994 2008 sub period suggesting that the deregulation have not improved the efficiency on the wti crude oil market in the sense of making returns less predictable

misspecification versus bubbles in hyperinflation data monte carlo and interwar european evidence abstract this paper analyzes some new tests of the cagan hyperinflation money demand model which have several advantages relative to those in the literature they do not confound specification error with rational bubbles can be implemented with a linear procedure and are frequently able to detect periodically collapsing bubbles which have challenged existing tests after a monte carlo analysis the tests are applied to data from hyperinflations in austria germany hungary and poland evidence of misspecification is found for austria germany and hungary while the model without a rational bubble component appears to fit the data for poland

exchange rate regimes in transition italy 1974 in order to explain the behavior of the lira during the operation of the italian two tier exchange market in 1973 74 we develop a model of exchange rate regimes in transition on the assumption that the market will set exchange rates so as to eliminate speculative profits at the time of transition the model indicates that expectations of a transition combined with uncertainty about the nature of the post transition regime can cause a jump in exchange rates at the moment of transition as well as volatile exchange rate movements prior to the transition the model suggests that the perceived temporariness of an exchange rate regime should be treated as a market fundamental

a positive theory of inflation and inflation variance a positive theory of inflation and inflation variance empirically inflation and the variance of inflation are positively associated this paper develops a model that provides a potential explanation for this relationship in terms of the incentives facing the policymaker in a discretionary equilibrium the model can also account for an empirical association between inflation and measures of real output instability there is however no direct causal link whatever from the average rate of inflation to either the variance of inflation or that of real output i introduction the debate over the use rules or discretion in monetary policy has been central to macroeconomics for many years e g simons 1963 lucas 1980 buiter 1980 recently kydland and prescott 1977 and barro and gordon 1983a b have identified discretion as the absence of policy commitment in a game between policymakers and the public they argued that discretionary policymaking will lead governments to create excessive inflation a policy of low inflation is not consistent with incentives facing governments and thus will not be believed by the private sector barro and gordon 1983a argue that this positive theory of monetary policy can help to explain many features of the trend rate of inflation in modern economies high and persistent rates of inflation a positive relationship between inflation and unemployment and the observed countercyclical behaviour of monetary authorities among others these models are based on the premise that there are significant costs to a high but fully anticipated rate of inflation another feature of inflation in modern economics however is the well documented fact that inflation and the variability of inflation are positively associated this phenomenon has been widely observed over different countries at different times 1 this has led researchers to question the feasibility of a steady and predictable positive rate of inflation the finding suggests that high rates of inflation may reduce the ability to forecast future inflation rates a high average inflation rate may add an unnecessary degree of uncertainty to individual decision making and lead to a misallocation of resources friedman 1977 suggests that this may cause output instability and possibly raise the average unemployed rate a related paper by logue and sweeney 1981 establishes that there is a positive relationship between inflation and the variability of economic growth for industrial countries given this perspective the welfare costs associated with inflation might be considerably higher than the traditional costs of anticipated inflation this paper extends the barro and gordon 1983a model of discretionary monetary policy to take account of the relationship between inflation and measures of inflation and output variability the extension focussed on is to model an endogenous wage indexing scheme in the labor market in the discretionary equilibrium wage setters not only form rational expectations of the future price level but also choose an optimal degree of wage indexation this extension to the basic model has the following properties of a discretionary equilibrium 1 there is a positive association between the mean rate of inflation and the magnitude of real disturbances in the economy as well as between the mean inflation rate and the degree of output instability in the economy 2 in an economy where real disturbances are relatively important there is a positive association between the mean rate of inflation and the variance of inflation the explanation behind these results is as follows the lower is the degree of wage indexation the greater is the incentive for monetary authorities to cause surprise inflation and hence the higher is the mean rate of inflation in a discretionary equilibrium but the degree of wage indexation is negatively related to the variance of real disturbances in an economy which is subject to both real and nominal disturbances

discovering the link between inflation rates and inflation uncertainty a new time series model is used to reassess the strength of the link between inflation uncertainty and the level of inflation in the united states the model provides several statistical measures that can be used to examine different aspects of uncertainty the main finding is that uncertainty about the long rather than short term prospects for inflation moved strongly with the rate of inflation since the early 1970s copyright 1991 by ohio state university press

inflation output and money this paper uses money demand theory and a rational expectations version of the quantity theory of money to study inflation in the united states during the post korean war period the major results are as follows 1 the theory and tests explain the phenomenon of stagflation that is the negative relation between inflation and real activity observed during the post 1953 period the analysis calls into question the many variants of the phillips curve which presume that inflation real activity relations are positive 2 consistent with the models of patinkin 1961 and fama 1980 monthly quarterly and annual data indicate that the base currency plus reserves held against deposits is the relevant monetary variable in the inflation process and that demand deposits are irrelevant the direct policy implication is that the base is the key monetary variable in the control of inflation 3 the most convincing evidence for the simple quantity theory view of inflation proposed here comes from the comparison of the conditional exmoney demand theory and the quantity theory of money are used to study the inflation process as predicted by the model monthly quarterly and annual data indicate that inflation is positively related to money growth rates and negatively related to growth rates of real activity the theoretical and empirical origins of stagflation are explained and changes in monetary arrangements to simplify the control of inflation are prescribed

gold monetization and gold discipline gold and its price have emerged as frequent topics of both academic and government debate 2 public attention focused on the gold market since gold s price began fluctuating violently in 1980 and 1981 has turned to gold as a possible means of removing some discretion inherent in the current fiat money system since lack of adherence to monetary rules can lead to problems of dynamic policy inconsistency academic economists have begun seriously to reconsider monetary standards based either on gold or on some other commodity as politically feasible methods of establishing rules 3

are the crude oil markets becoming weakly efficient over time a test for time varying long range dependence in prices and volatility this paper analyzes the efficiency of crude oil markets brent and west texas intermediate by means of estimating the fractal structure of these time series we test for time varying degrees of long range dependence using the rescaled range hurst analysis and find evidence that this market has become more efficient over time these results are robust for controlling for short term autocorrelation by means of a shuffling procedure

the role of rare earth prices for consumer prices an ignored factor abstractthe article explores the role of a new determinant that accounts for driving consumer prices i e rare earth prices rare earths are used for many advanced manufacturing and military technologies performing a number of panel methodological approaches panel cointegration findings support the initial insight of the authors and illustrate a positive effect on consumer prices across all rare earths

the pricing of interest rate risk evidence from the stock market this paper addresses the issue of whether firms are required to pay an ex ante premium to investors for bearing the risk of interest rate changes a two factor apt model with the market and changes in the yield on long term government bonds as factors is employed the paper shows that empirically most of the interest sensitive stocks are in the utility industries and that there is reasonable evidence that the interest factor is priced in the sense of the apt several sources for the interest sensitivity are considered and regulatory lags are focused on as a likely candidate some firms exhibit ex post sensitivity in their stock returns to unanticipated changes in interest rates are these firms required to pay investors ex ante for bearing this risk of interest rate changes the framework for examining pricing of unanticipated interest rate changes is a two factor apt model with the market and changes in the yield on long term government bonds as factors the issue is whether the interest rate change premium is significant to study this the paper uses full information maximum likelihood fiml estimation on groups of twenty five individual firms with both cross equation constraints and withinequation nonlinear constraints on the parameters as mandated by the apt model whether the risk of unanticipated changes in interest rates is priced in the market is of particular interest with regard to regulated firms regulated firms especially electric utilities turn out to comprise the big majority of firms that are sensitive to unanticipated interest rate changes after some preliminary investigation the analysis focuses on electric utilities much empirical work on the apt relies on factor analysis e g roll and ross 30 bower bower and logue 5 use factor analysis in comparing the apt and the capm to explain utilities returns the present paper however uses observable variables at the macro level chan chen and hsieh cch 7 and chen roll and ross crr 8 also examine apt models with specific macroeconomic factors cch and crr use a traditional fama macbeth type of cross sectional estimation approach in the premia calculations rather than a fiml approach gibbons and stambaugh have applied fiml techniques to models using only the market as an explanatory variable gibbons 20 used a noniterative algorithm on portfolios of firms equivalent to a two step cross sectional approach stam

credibility and changes in policy regime this paper addresses the issue of credibility from an econometric perspective it develops a rational expectations model of inflation in which the dynamics are driven by the level of government spending and by the effect of past inflation rates on the value of real taxes government expenditure is modeled as an exogenous autoregressive process subject to discrete changes in regime the regimes are defined by whether the level of spending is or is not consistent with the rate of inflation targeted by the government as part of a stabilization program in making their money demand decision the agents need to construct probability inferences regarding the state of the expenditure process credibility is quantified by the agents inferred probability that the joint observation of inflation the nominal interest rate and government spending is generated by the reformed expenditure regime in an application to israel results indicate that the failed stabilization program of november 1984 was less than fully c

the transmission of disturbances under alternative exchange rate regimes with optimal indexing the paper develops a general stochastic macroeconomic model that can be used to study the international transmission of disturbances under four alternative exchange rate systems uniform flexible exchange rates uniform fixed exchange rates and two versions of two tier exchange rates the analysis makes two general points first one cannot assume stability of structure when assessing the consequences of alternative exchange rate regimes for example the slope of the aggregate supply curve and the rationally formed expectations in the asset markets can respond dramatically to the government s choice of exchange rate regime second exchange rate regimes that provide full insulation from foreign disturbances may nevertheless be inferior to other regimes in terms of their ability to maximize social welfare

hyperinflations their origins development and termination abstract this paper summarizes and critically surveys research on hyperinflation appraisal and review of the literature considers the origins development termination and the lessons to be learned from hyperinflations the historical evidence as well as the econometric evidence is analyzed it is concluded that while the lessons to be learned from such episodes perhaps have been overstated a number of useful implications may be derived from studying hyperinflations such as an understanding of the forces which link monetary and fiscal policies to inflation and policy makers role in influencing individuals expectations

inflation and real growth some empirical results what is the relationship between the average rate of inflation and the variability of real economic growth recent studies by gordon 3 okun 7 logue and willett 6 klein 5 and jaffee and kleiman 4 have attempted to f1ll some of the gaps in our knowledge of inflation s effect on the economy these studies have generally demonstrated the positive empirical relationship between the rate of inflation and its variability or unpredictability such heightened uncertainty may produce greater variability of real growth which in turn undoubtedly increases welfare costs using annual data for twenty four countries we elnd a positive relationship between the mean inflation rate and the variability of real economic growth this finding strengthens the commonly held belief that inflation is undesirable on welfare grounds

testing the evolution of crude oil market efficiency data have the conn utilising a time varying gar 1 tgarch 1 1 model with different frequency data we investigate the weak form efficiency of major global crude oil spot markets in europe the us the uae and china for the period from december 2001 to august 2013 our empirical results with weekly data indicate that all four markets have reached efficiency with few brief inefficient periods during the past decade whereas the daily crude oil returns series suggest intermittent and inconsistent efficiency we argue that the weekly friday series fit the data better than the average series in autocorrelation tests the evidence suggests that all four markets exhibit asymmetries in return volatility reactions to different information shocks and that they react more strongly to bad news than to good news the 2008 financial crisis has significantly affected the efficiency of oil markets furthermore a comovement phenomenon and volatility spillover effects exist among the oil markets policy recommendations consistent with our empirical results are proposed which address three issues implementing prudential regulations establishing an asian pricing centre and improving transparency in crude oil spot markets

the dynamics of inflation with constant deficit under expected regime change a model that describes the dynamics of inflation with a fully anticipated stabilization program is developed it is shown that with a constant deficit an economy tends to stay at the neighborhood of the lower of the two state inflation rates that are compatible with the deficit further increasing inflation rates prior to the stabilization are compatible only with deficits that are lower than the maximal feasible staedy state deficits and with a stabilization program that reduces the demand for real balances if these conditions are not met inflation decreases towards the stabilization date it is argued that the data generated by actual inflationary episodes fit the conditions described above and corroborate the model this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

insulation properties of a two tier exchange market in a portfolio balance model when countries peg their currencies to those of their major trading partners they expose themselves to interest sensitive and speculative capital flows that can undermine their ability both to maintain their exchange rate and to pursue an independent monetary policy some countries notably france italy and the belgo luxembourg economic union bleu experimented with two tier exchange rates in the early 1970s in the hopes of insulating their economies from the effects of international capital flows while at the same time protecting foreign trade from exchange rate fluctuations france and italy soon abandoned the experiment but the bleu continues to maintain separate exchange markets with separate exchange rates for current and capital account transactions the commercial exchange rate which relates to the market for current account transactions is generally pegged by the authorities the financial exchange rate determined in the market for capital account transactions is usually free to fluctuate 1 this paper investigates how well a two tier exchange market insulates a small open economy from foreign disturbances taking into account recent developments in the theory of exchange rate determination work by branson 1977 dornbusch 1976 and kouri 1976 suggests that the short run equilibrium value of the exchange rate is determined along with interest rates by demand and supply in the markets for financial assets this asset market or portfolio balance approach to exchange rate determination is particularly well suited to a study of the two tier exchange market one can view the financial exchange rate as a relative asset price it is among the variables that equilibrate asset markets and it is determined in the short run in those asset markets previous theoretical work on the two tier exchange market has generally been within the mundellian framework the financial exchange rate has been treated as equating a flow demand and supply of foreign exchange the asset market approach has the advantage of carefully distinguishing between stocks and flows in particular it treats demands for assets as stock demands that are realized instantaneously so that actual holdings of assets always reflect the desired composition of the portfolio disturbances to portfolio equilibrium create immediate stock adjustments as portfolios are rebalanced causing instantaneous changes in endogenous market clearing variables in addition disturbances alter the rate of accumulation the flow of financial assets over time portfolio balance models of two tier exchange rates can be found in dornbusch 1976 and decaluwe and steinherr 1976 but they differ from the one presented here dornbusch partitioned the exchange market so that interest income a current account transaction was channelled through the financial market that segmentation yields a different expected rate of return on foreign

market efficiency of oil spot and futures a mean variance and stochastic dominance approach this paper examines the market efficiency of oil spot and futures prices by using both mean variance mv and stochastic dominance sd approaches based on the west texas intermediate crude oil data for the sample period 1989 2008 we find no evidence of any mv and sd relationships between oil spot and futures indices this infers that there is no arbitrage opportunity between these two markets spot and futures do not dominate one another investors are indifferent to investing spot or futures and the spot and futures oil markets are efficient and rational the empirical findings are robust to each sub period before and after the crises for different crises and also to portfolio diversification

efficiency of crude oil markets evidences from informational entropy analysis abstract the role of crude oil as the main energy source for the global economic activity has motivated the discussion about the dynamics and causes of crude oil price changes an accurate understanding of the issue should provide important guidelines for the design of optimal policies and government budget planning using daily data for wti over the period january 1986 march 2011 we analyze the evolution of the informational complexity and efficiency for the crude oil market through multiscale entropy analysis the results indicated that the crude oil market is informationally efficient over the scrutinized period except for two periods that correspond to the early 1990s and late 2000s us recessions overall the results showed that deregulation has improved the operation of the market in the sense of making returns less predictable on the other hand there is some evidence that the probability of having a severe us economic recession increases as the informational efficiency decreases which indicates that returns from crude oil markets are less uncertain during economic downturns