[PDF] A Factorial Decomposition Of Inflation In Peru An Alternative Measure Of Core Inflation eBook

Author : Eduardo A. Morón
Publisher :
Page : 0 pages
File Size : 44,36 MB
Release : 1999
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In the last years four Latin American countries (Chile, Colombia, Mexico and Peru) have switched to inflation targeting as the main mechanism to guide their monetary policies. In this paper we address some of the basic questions regarding its implementation: (i) which inflation measure should use: core vs headline; (ii) how forecastable are these measures of inflation; and (iii) how effective is the monetary policy to control its behavior. The paper follows the steps of Bryan and Cecchetti (1993). However, all these questions have specific qualifications in a small, open and dollarized economy in which the ability of the Central Bank might be eroded by currency substitution problems. We found that the Peruvian Central Bank should target the CPI inflation but conduct its monetary policy forecasting a core inflation measure in a 12-month horizon as the currency substitution problem does not seem to impose a severe restriction as previously analyzed in Moron (1997).

Author : Eduardo A. Morón
Publisher :
Page : 0 pages
File Size : 16,87 MB
Release : 1999
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A central element of an inflation targeting approach to monetary policy is a proper measure of inflation. The international evidence suggests the use of core inflation measures. In this paper we claim that core inflation should be measured as the underlying trend of inflation that comes from nominal shocks that have no real effect in the long term. However, most of the time core inflation is computed zero weighting observations at the tail of the inflation distribution. Quah and Vahey (1996) proposed a method of computing core inflation imposing theory constraints to a SVAR specification. In this paper we present estimation for Peruvian data and compare the predictability properties of competing measures of inflation following an idea of Diebold and Killian (1997).

Author : Mr.Si Guo
Publisher : International Monetary Fund
Page : 20 pages
File Size : 38,85 MB
Release : 2019-07-12
Category : Business & Economics
ISBN : 1498319327

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Inflation rates rose sharply in the Philippines during 2018. Understanding the demand and supply sources of inflation pressures is key to monetary policy response. Qualitatively, indicators have pointed to evidence of inflation pressures from both sides in 2018, with the supply factors, by and large, associated with commodity-price shocks and demand factors deduced from gleaning at the wider non-oil trade deficits seen in the Philippines. Quantitatively, we deploy a semi-structural model to decompose the contributions of various shocks to inflation. Our main findings are (1) supply factors (mainly global commodity prices) played a prominent role in explaining the rise in inflation in 2018; (2) demand factors also contributed to inflation in a non-negligible way, justifying the need for tighter monetary policy in 2018; (3) the size of the estimated output gap (an important indicator of demand pressures) could be larger, when considering the widening trade deficits in 2018; and (4) a delayed monetary policy tightening can be costly in terms of higher inflation rates, requiring larger and more aggressive interest rate hikes to bring inflation under control, based on a counterfactual exercise.

Author : Laurent Ferrara
Publisher : Springer
Page : 300 pages
File Size : 37,67 MB
Release : 2018-06-13
Category : Business & Economics
ISBN : 3319790757

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This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.