This thesis studies the relative roles of monetary and fiscal policies to achieve the basic macroeconomic objectives of stable prices with sustainable growth in Pakistan. Using data from December 1981 till June 2008, the changes in the monetary policy stance are shown to be capable of affecting the domestic price level and output growth. This thesis also tests the fiscal theory of price determination using quarterly data for the sample period 1977q1-2009q4, by investigating the relationship between the fiscal deficit, debt accumulation and inflation dynamics. The estimates reveal that there exists a fiscal dominant regime for most of the sample period since the fiscal authority is insensitive to monetary policy in the sense that neither taxes nor expenditure react (now or in the future) to the changes in the stock of outstanding government debt. It is also found that changes in the primary deficit exert an effect on aggregate demand which is also evidence of an active fiscal policy regime. This study also explores the indirect channels of fiscal regime by including a monetary, real sector, exchange rate and the consolidated budget deficit variables in three different specifications of vector error correction models and finds the monetary and fiscal variables as the key determinants of inflation in Pakistan. It also suggests a positive and significant relationship between the budget deficit and seigniorage revenues, confirming the monetisation of the fiscal deficit and indirect evidence of the fiscal dominance in the economy. In addition, this thesis employs a SVAR specification of exogenous fiscal policy shocks to observe the relative effectiveness of fiscal multipliers and finds their significant role to affect inflation and output in the economy. Finally this study develops and estimates a small macro-econometric model and then it is used to assess the relative performance of the monetary and fiscal policies in Pakistan. Policy simulations suggest that if Pakistan follows a rule based regime then macroeconomic stability can be improved in terms of the stability of output and inflation.

No description available.

The combination of price inflation and historical cost-based depreciation for tax purposes has been shown in the finance literature to reduce the present value of depreciation deductions. Since tax depreciation deductions are limited to a nominal dollar amount, when inflation occurs a future tax deduction has less real value. This effect is pedagogically presented in a capital budgeting context. In the economic literature Hotelling and Herfindahl have contributed models describing natural resource production changes in response to changes in demand, production cost, and cost of capital. Parts of the inflation-explicit capital budgeting model and the Hotelling and Herfindahl models are combined. The result is a partial equilibrium model which yields the conclusion that production from a natural resource is reduced if inflation is increased. Copper industry data from 1947-1978 are examined for empirical confirmation of the theoretical model. A copper industry production function, which contained demand, real price and labor strike variables, gained in descriptive capability by inclusion of inflation as an additional multiple regression variable. The dissertation reviews literature on the relationship between capital investment and inflation. The cases of hyper-inflation in Germany and medium inflation in Latin America are considered. Other literature review topics include the inflation effects in the securities markets, inflation-caused wealth transfers and inflation adjustments in accounting statements.

The objective of this thesis is to see how effectively can central banks can conduct monetary policy under specific circumstances. Four hypothesis are being examined on the case study of five central banks - the Czech National Bank, the Central Bank of Chile, the Bank of Jamaica, the Central Bank of Argentina and the Swiss National Bank. Firstly this work confirms that solid monetary policy can be applied even if CB is dealing with loss based on inflation targeting success rate of central banks. Secondly, in the case of Czech National Bank using VAR, was concluded that inflation expectations can influence the outcome of CB's monetary policy. In the second part of this hypothesis the expectations from the government side in SNB case were examined. On the case of Argentina the negative effect of adjusting monetary policy was demonstrated. The last part elaborates on the topic of determining optimal capitalisation of central bank.

After the recent financial crisis of 2007, a connection between monetary policy and financial stability has started to be thoroughly investigated. One of the particular areas of this research field deals with the role of various financial variables in the monetary policy rules. The main purpose of this research is to find whether direct incorporation of the financial variables in the monetary policy rule can bring macroeconomic benefits in terms of lower volatility of inflation and output. So far, the main emphasis of the research has been placed on the investigation of the augmented Taylor rules in the context of a closed economy. This thesis sheds light on the performance of the augmented Taylor rules in a small open economy. For this purpose, a New Keynesian DSGE model with two types of financial frictions is constructed. The model is calibrated for the Czech Republic. The thesis provides four conclusions. First, incorporation of the financial variables (asset prices and the volume of credit) in the monetary policy rule is beneficial for macroeconomic stabilization in terms of lower implied volatilities of inflation and output. Second, the usefulness of the augmented monetary policy rule is the most apparent in case of the shock originating abroad. Third, there is a strong link between the financial and the...

M.Comm. (Financial Economics) / This dissertation examines the relationship between inflation, inflation uncertainty, and economic growth using quarterly data for South Africa covering the period 1960-2012. Inflation uncertainty is estimated using the Generalized Autoregressive Conditional Heteroscedasticity modelling framework. Granger methods are employed in order to investigate the interaction between inflation, inflation uncertainty, and economic growth. The presence of structural change is investigated through dummy variables representing changes in monetary policy regime. No evidence is found of any significant structural change in either inflation or inflation uncertainty. Granger results indicate that inflation uncertainty has a negative impact on inflation, supporting Holland’s (1995) argument of stabilising central bank behaviour. Conversely, there is evidence that high inflation leads to elevated inflation uncertainty, in accordance with Friedman’s (1977) hypothesis. Inflation uncertainty does not have a significant impact on economic growth in South Africa. However, inflation does have an adverse effect on economic growth, whilst economic growth exerts a positive impact on the rate of inflation. Lastly, economic growth does not have any meaningful effect on inflation uncertainty.

Output gap belongs to standard indicators of inflationary pressures used in central banks. The aim of this paper is to find the answer to the question, whether we can consider output gap as a suitable indicator of inflation for the Czech economy. First hypothesis, which we analysed is that we can estimate output gap only with uncertainty. For confirmation or refutation of this hypothesis we used ten models of estimation of output gap. The second hypothesis is that output gap can be used as suitable indicator of inflation. For testing of this hypothesis we chose gap model from Coe, McDetmott (1997) -- with the level of output gap and the change (difference) of output gap. All tests confirmed, that central bank can use inflation as a useful indicator of inflation.

The thesis aims to defend the irreplaceable role of the Austrian business cycle theory in explaining the current financial crisis in the U.S.. Attention is also paid to applied measures of American economic policies and their impact on the elimination of the purification process of the recession. Furthermore, the work deals with the identification of preventive measures, which would reduce the likelihood of the occurrence of economic cycles. Recommendations by representatives of the Austrian School are described as difficult to implement on the basis of number of arguments. In the work are therefore proposed more realistic measures to limit the volatility of the economic cycle, which emanate mainly from the composite price index, which is the subject of this text. The index reflects the price development in all stages of production and should therefore in monetary policy matters replace the current use of price indicators, based on the inflated scale of consumption, taking into account only minimal effects of monetary expansion. The work deals with the calculation of the composite price index for the United States, which used the instrument of Skounsen indicator of gross domestic output. The development of the composite price index in the US is then analyzed and compared with the development of other macroeconomic variables. Based on this examination, we recommend the use of composite price index for monetary policy regime of inflation targeting and the implementation thereof by the Federal Reserve monetary policy.

In this paper, we examine international linkages in inflation and short-term interest rates using a global sample of OECD and emerging economies. Using a Bayesian global vector autoregression (GVAR) model, we show that for short-term interest rates both movements in inflation and output play an important role. In advanced countries, however, international factors such as foreign interest rates appear as an important driver of local interest rates. For inflation, we also find evidence for the importance of global factors, such as price developments in other countries, oil prices and the exchange rate. Again, this impact of global factors appears predominately in advanced countries. / Series: Department of Economics Working Paper Series

Este trabalho busca compreender como o governo do presidente Eurico Gaspar Dutra (vigorou de 31 de janeiro de 1946 a 31 de janeiro de 1951) fez uso dos instrumentos de política econômica acerca da renda e do salário mínimo, bem como seus reflexos nas questões do trabalho, do trabalhador e nos meios de representação deste. O governo do Presidente Eurico Gaspar Dutra é normalmente conhecido como o governo entre os governos de Getúlio Vargas e talvez, por isso, é pouco estudado pela academia, diferente de seu antecessor-sucessor. Busca-se neste trabalho contribuir para a pesquisa do governo Dutra que, apesar de considerado um interregno entre os governos de Getúlio Vargas, abandonou o varguismo e imprimiu uma política liberal e extremamente repressiva contra a classe trabalhadora, contribuindo para a perda de parte da renda do trabalhador brasileiro daquela época, com, talvez, reflexos em nossos dias. A política de arrocho salarial de Dutra foi um duro golpe contra os trabalhadores e em favor do capital. Os instrumentos de política econômica de Dutra são alvos de discussão no presente trabalho, com ênfase nas questões acerca do salário mínimo, situação do trabalhador e inflação. Questões estas praticamente atemporais na economia brasileira. / This paper seeks to understand how the government of President Eurico Gaspar Dutra (from January 31, 1946 to January 31, 1951) made use of the economic policy instruments on income and the minimum wage as well as its reflections on labor issues, of the worker and in the means of representing him. The government of President Eurico Gaspar Dutra is usually known as the government between the governments of Getúlio Vargas and, perhaps because of this, is little studied by the academy, different from its predecessor-successor The paper seeks to contribute to the research of the Dutra government which, although considered an interregnum between the governments of Getúlio Vargas, abandoned the \"varguismo\" and printed a liberal and extremely repressive policy against the working class, contributing to the loss of part of the income of the Brazilian worker of that time, with perhaps reflections in our day. Dutra\'s wage policy was a blow to the workers in favor of the capital. Dutra\'s economic policy instruments are the subject of discussion in this paper, with emphasis on issues such as the minimum wage, the worker\'s situation and inflation. These issues are practically timeless in the Brazilian economy.