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Inflation has been a recurrent and critical problem in many Latin American countries. Inflation is often combined with, among other problems, serious distortions in the structure of relative prices thus reducing efficiency of the pricing mechanism in allocating resources. The purpose of this study is to examine the effects of inflation and other variables on relative price variability in Peru using two different types of models. After preliminary evaluation of the stationarity properties of the series, a relative price variability measure is constructed using monthly data on 32 components of the CPI over the period 1979:12-1988:07. For the first models, series of expected and unexpected inflation in Peru, real exchange rate movements, and U.S. relative price variability are constructed and the effects of these variables on observed relative price variability are determined. The results indicate that increasing levels and unpredictability of inflation cause increased dispersion of relative prices. A distinction between expected and unexpected relative price changes is made in the second model. This distinction is relevant because not all price movements are viewed by agents as surprises that confuse price signals. To account for this distinction, a measure of conditional relative price variability is estimated using Engle's (1982) autoregressive conditional heteroskedasticity approach. Similarly, the conditional variance of domestic inflation is estimated and used as a measure of price uncertainty. Effects of the time-dependent conditional variances of domestic inflation and real exchange rate on a weighted average of the relative price shocks normalized by their conditional variances are evaluated and found statistically significant. Finally, both methods of testing empirically the hypothesis that inflation uncertainty increases relative price variability provided consistent results. / Master of Science

A multi-market model relating the variance of relative price changes to unanticipated inflation and real income was developed by Richard Parks for an article in the Journal of Political Economy. Parks used annual data in his estimation, and his use of the current rate of inflation as a predictor for next period's rate was rather simplistic. In this paper, his model was tested with two alternative specifications for anticipated inflation and with quarterly rather than annual data for the period 1947 through 1978. Anticipated inflation was estimated by (1) a time-series of past interest rates, and (2) a time-series of past inflation rates and the money supply. The multi-market model was estimated by employing the Cochrane-Orcutt iterative technique. The regression results gave additional support for Parks' model, but the respective roles for the two causal variables, unanticipated inflation, and real income, were reversed. Unanticipated inflation was seen to have a stronger effect in the quarterly data than it had in Parks' estimation with annual data. Relative price changes that result from an inflation that is unanticipated was said to be a temporary phenomenon. This was suggested to be the reason for the role reversal of the two causal variables because a temporary relationship such as the model attempts to estimate would be expected to show itself more significantly in quarterly data than it would in annual data. It was also suggested that unanticipated inflation may play a role in the persistence of staflation. / M.A.

Inflation targeting is a monetary policy regime, characterized by public announcement of official target ranges or quantitative targets for price level increases and by explicit acknowledgement that low inflation is the most crucial long-run objective of the monetary authorities. There are three prerequisites for inflation targeting: 1)central bank independence,2)having a sole target,3)existence of stable and predictable relationship between monetary policy instruments and inflation.In many developing countries, the use of seigniorage revenues as an important source of financing public debts, the lack of commitment to low inflation as a primary goal by monetary authorities, considerable exchange rate flexibility, lack of substantial operational independence of the central bank or of powerful models to make domestic inflation forecasts hinder the satisfaction of these requirements. This study investigates the applicability of inflation targeting to the Turkish economy. Central bank independence in Turkey has been mainly hindered by "fiscal dominance" through monetization of high budget deficits. In addition, although serious steps have been taken recently under a new law to have an independent central bank, such as formal commitment to the achievement of price stability as the primary objective and the prohibition of credit extension to the government, the central bank does not satisfy independence criteria due to the problems associated with the appointment of the government and the share of the Treasury within the bank. Having a sole inflation target was hindered by the existence of fixed exchange rate system throughout the years. However, in February 2001, Turkey switched to a floating exchange rate regime, which is important for a successful inflation-targeting regime. Having a sole target within the system has also been supported by the new central bank law, which gives priority to price stability and supports any other objective as long as it is consistent with price stability. In this thesis, an empirical investigation has been made in order to assess the statistical readiness of Turkey to satisfy the requirements of inflation-targeting by making use of vector autoregressive (VAR) models. The results suggest that inflation is an inertial phenomenon in Turkey and money, interest rates and nominal exchange rates innovations are not economically and statistically important determinants of prices. Most of the variances in prices are explained by prices themselves. According to the VAR evidence, the direct linkages between monetary policy instruments and inflation do not seem to be strong, stable, and predictable. As a result, while the second requirement of the inflation-targeting regime seems to have been satisfied, there are still problems associated with the central bank independence and the existence of stable and predictable relationship between monetary policy instruments and inflation in Turkey. / Master of Arts

Efter många år av ett fördelaktigt ränteläge för såväl företag som privata hushåll höjde Riksbanken styrräntan till över 0% i maj 2022. I september 2023 sattes styrräntan till 4% och hölls konstant i många månader. Denna justering har krävt omställningar i fastighetsbranschen och fastighetsbolag i Sverige har påverkats mycket vilket kan bero på deras kapitalbehov. Från att kunna låna kapital till väldigt fördelaktiga nivåer till att verka med andra premisser har påverkat många led inom företagen.  Tidigare forskning inom fastighetsbranschen under ekonomiskt osäkra tider har främst undersökt finansiell data genom kvantitativ metodologi. Utöver det finansiella fokuset har många tidigare studier undersökt andra marknader och länder och dess resultat har inte varit direkt tillämpligt i den svenska kontexten. Därför har denna studie haft en utgångspunkt i ledarskapsperspektivet och hur ledare i svenska fastighetsbolag agerat och reagerat i den osäkra ekonomiska situationen. Detta resulterade i följande forskningsfråga.  Hur förändras ledarskapet och strategierna inom fastighetsbolag vid ekonomiskt osäkra tider? Studiens syfte är att undersöka hur fastighetsbolagen navigerar i tider som präglas av en stor grad ekonomisk osäkerhet och vilken roll ledarskapet har i att lyckas förändra och styra fastighetsbolagen igenom sådana situationer på bästa möjliga sätt. Studien kommer därmed bidra med en ökad förståelse kring vilka faktorer det är som är avgörande i strategiplaneringen och vilka aspekter som påverkar vad när det kommer till ledarskapet.  Studien använde en induktiv metodologi där det teoretiska ramverket låg till grund för den semistrukturerade intervjuguiden som användes i intervjuerna. Samtliga sju respondenter innehar roller i direkt anslutning till vd:n på respektive fastighetsbolag för att få en så verksamhetstäckande analys av dess situation som möjligt. Studien hade även tydliga avgränsningar för att kunna identifiera fastighetsbolag som var jämförbara.  Slutligen kommer studien fram till att det är och har varit en tuff tid för fastighetsbolagen då en oro spred sig initialt i branschen från det att Riksbanken först höjde styrräntan i maj 2022. Det som har varit det genomgående tydligaste strategiska responsen var att öka transparensen inom respektive bolag för att på så sätt motivera de beslut som tagits. Utöver det så framgår det att ledarskapet till stora delar är ett resultat av vilka förutsättningar respektive bolag hade där det var stora skillnader bolag emellan, mycket beroende på vilken lånestruktur respektive bolag arbetade utifrån.

In recent years, the world has been facing external factors such as the Covid-19 pandemic and Russia’s invasion of Ukraine. The results have led to a more unstable global situation and inflation levels have risen to higher levels, which has affected many companies negatively as higher costs and a worsen real value of money have impaired the purchasing power. Normally, a higher cash holding would mean that companies are more resilient to risky situations and turbulence on the market. In periods with higher inflation however, this can have the opposite effect as a larger amount of cash during periods of high inflation loses its real value. The purpose of this study is to study how companies choose to act during periods of high inflation levels compared to periods of low inflation levels, regarding their cash holdings. The purpose of the study has been to examine how the relationship between Scandinavian listed companies cash holdings looks like in relation to inflation, but also whether there are any differences in cash holdings between high and low inflation periods. Previous studies that have been done in this area have found a U-shaped relationship, which means that companies choose to reduce their cash holdings during periods of low inflation and increase their cash holdings during periods of high inflation to protect themselves against the risks that higher inflation entails. This study has found a similar relationship, where the only difference has been that cash holdings follow a constant increase with inflation through all inflation levels. When inflation reaches higher levels, however, it has been possible to see that companies choose to increase their cash holdings to higher levels than during previous periods with lower inflation rates. The reason why the results differ could be because the studies have been done in two separate parts of the world, but also because the studies have been done during two different time periods where this study has been done in periods where inflation has been unusually high due to the external world situation. In the future, it would’ve been interesting if studies were conducted in other parts of the world during the same time-period as this study, to see more clearly if the results would differ in comparison to other studies in the area. / Under de senaste åren har världen mötts av externa faktorer som Covid-19 pandemin och Rysslands invasion av Ukraina. Detta har resulterat i att omvärldsläget blivit mer instabilt och inflationsnivåerna har stigit till höga nivåer, vilket har påverkat många företag negativt då högre kostnader samt ett försämrat realvärde på pengar har försämrat köpkraften. I normala fall skulle ett högre kassainnehav innebära att företag är mer motståndskraftiga mot riskfyllda situationer och turbulens på marknaden. Vid inflationsperioder kan detta däremot ha motsatt effekt då en större mängd kassainnehav under höga inflationsperioder tappar sitt reala värde. Denna studie riktar sig mot att studera hur företag väljer att agera under höginflationsperioder i jämförelse mot låginflationsperioder rörande deras kassainnehav. Studiens syfte har varit att undersöka hur sambandet mellan skandinaviska börsnoterade bolags kassainnehav ser ut i förhållande till inflationen, men även om det finns någon skillnad i kassainnehavet mellan hög och låginflationsperioder. Tidigare studier som har gjorts inom detta område har hittat ett U-samband, vilket innebär att företag väljer att minska sitt kassainnehav under låginflationsperioder och öka kassainnehavet under höginflationsperioder för att skydda sig mot de risker som högre inflation bär med sig. Denna studie har hittat ett liknande samband, där den enda skillnaden har varit att kassainnehavet följer en konstant ökning med inflationen genom alla inflationsnivåer. När inflationen kommer når högre nivåer, har man däremot kunnat se att företag väljer att öka sina kassainnehav till högre nivåer än tidigare. Anledningen till att resultaten skiljer sig åt, skulle kunna bero på att studierna har gjorts på två olika delar av världen, men även då studierna har gjorts under två olika tidsperioder där denna studie har gjorts under perioder där inflationen har varit ovanligt hög på grund av omvärldsläget. I framtiden hade det därför varit intressant om studier gjordes i andra världsdelar under samma tidsperiod för att tydligare se om dessa leder till skillnader i de resultat som tidigare studier har producerat.

In the first chapter, I examine an incomplete markets economy in a politico-economic general equilibrium setting in which the median voter chooses the inflation rate. I use an environment where individuals face an uninsurable idiosyncratic labor productivity shock, and money is the only asset. Being an effective tax on savings, inflation acts as a redistribution mechanism transferring resources from the rich to the poor. I show that the median voter chooses a positive inflation rate as the politico-economic equilibrium outcome. In the second chapter, I analyze how forming a monetary union affects consumption and earnings inequalities through monetary policy changes implied by adopting a common currency. I use a two country open-economy, overlapping-generations model with heterogenous individuals to investigate these effects. In the model, inflation tax is the only redistributive tool and consumption and earnings inequalities are decreasing functions of inflation. When forming a monetary union, countries face a trade-off between the undesirable distributional effects of losing their monetary autonomy and benefits from the elimination of trade frictions. Findings suggest that when countries choose to do so, the country with higher initial inflation will definitely experience a fall in its inflation, hence an increase in its inequalities. In the country with lower initial inflation, however, inflation and inequalities might go in either direction depending on the degree of heterogeneity and the trade dependency between the countries. As the inflationary effect of uniting its monetary policy with a high inflation country can dominate the reducing effect of vanished trade frictions on inflation, this country might have an increase in its inflation, and a decrease in its inequalities. Finally, in the third chapter, I compare the indirect measure of inflation expectations derived by Ireland (1996b) to the direct measures obtained from expectations surveys in two case studies: the US and Turkey. Our results show that the inflation bounds calculated for US data are more volatile than survey results, and are too narrow to contain them due to low standard errors in consumption growth series stemming from high persistence. For the Turkish case, on the other hand, out of three different surveys on inflation expectations in Turkey compared with the bounds computed using Turkish data, expectations obtained by the Consumer Tendency Survey fall within these bounds throughout the whole sample period. Moreover we show that, as Fisher's theory suggests, real interest rates are extremely volatile in Turkey and movements in nominal interest rates cannot be directly used as an indicator of changes in inflation expectations. / text

This study develops empirical models for comprehensive inflation effects on stock returns in the Japanese economic and financial framework. Basically these models deal with the two kinds of wealth effects and inflation risk premia. The wealth transfers are related to a tax system and other institutional constraints while the wealth-size effect is based on the more fundamental stock price determinant of the flows of earnings. The inflation risk premia are the additionally required part of returns due to relative uncertainties in common stock investment under unstable inflation. Based on the stock valuation theory and on the efficiency of stock markets, it is found that the net effect of wealth transfers appears in ex post stock returns if expected inflation shifts from one level to another. However, the effect of the inflation-caused wealth transfers will not appear in stock returns even in varying inflation if positive and negative wealth transfers are perfectly offset. The test result supports this offset. As the result of testing inflation risk premia, the stock market tends to compensate the premia of unstable inflation for investors. Finally the wealth-size effect relates anticipated real activity to inflation in monetary sector behaviors as well as anticipated real activity to stock returns in real sector behaviors. The intermediate variable to transmit inflation to stock returns is real activity. In this context, inflation is just the proxy for real activity which essentially determines firm values. Empirically the wealth-size effect is supported with the inverse relationship between inflation and real stock returns. For Japanese economy, however, the wealth-size effect is not explained by the standard theory of capital investment. Real activity is correlated to (profit) returns on existing capital but not related to corporate capital investment. Capital investment is independent of other real sector variables as well as inflation. The result is attributed to governmental policy and controls for corporate investment. Thus, the obtained relationship between stock returns and inflation includes less practical implication in investment behaviors.

The major economic policy issue of the 1980s is inflation. Although economists have been writing about inflation for several decades, little work has been done on the theory of inflation measurement. There is an extensive literature dealing with the statistical aspects of price indices and the inflation phenomenon. However, statistical discussions ignore the economic theory behind inflation measures and inflation discussions fail to address the practical aspect of measurement of inflation. This dissertation develops an inflation measure that overcomes these failings. By combining the principles of price formation found in microeconomic literature with the macroeconomic theory of inflation, an economically appropriate measure of inflation is presented. The measure adopts the Marshallian view that producers fix prices and vary output in response to market conditions. Recognizing that production takes time which leads to uncertainty about the forward delivery market, the measure stresses both labor and material input costs as the prime price determinants. Contracts fix these costs. Current or spot market demand influences prices only in the service sector. This influence is measured and added to the price forming factors determined in oligopoly, monopoly and competitive sectors. The four sectors are combined with a measure of government price influence to generate the measure of inflation. A highly stylized model of this measure is tested monthly for the 1965-78 period. The theoretical measure and the model results are then compared to conventional inflation measures. The CPI, GNP deflator and WPI are discussed and their problems as measures of inflation are assessed. The measure proposed and tested here eliminates much of the sampling bias, substitution bias, and quality bias plaguing the others. Being designed as a measure of inflation in the general price level, the proposed measure actually incorporates the broad economic base necessary for a macroeconomic measure. It provides a useful policy guide for inflation management and an appropriate measure of the policy's success.