Economic Policy Uncertainty and Inflation Expectations

Istrefi, Klodiana; Piloiu, Anamaria

doi:10.2139/ssrn.2510829

Cited by 58 publications

(29 citation statements)

References 38 publications

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“…Even though inflation volatility is trending upward since 2014, the two spikes towards the end are outliers. Istrefi and Piloiu (2014) show how monetary policy uncertainty affects both short-and long-term inflation expectations. Short-term inflation declines following a rise in monetary policy uncertainty, whereas long-term expectations tend to increase.…”

Section: Determinants Of Monetary Policy Credibilitymentioning

confidence: 97%

Monetary Policy Credibility and Exchange Rate Pass-Through in South Africa

Kabundi¹,

Mlachila²

2018

IMF Working Papers

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This paper investigates the key factors that explain the documented decline in the exchange rate pass-through in South Africa over the past two decades, which coincides with the adoption of the inflation-targeting regime. The paper conjectures, in line with the literature, that this outcome is largely due to improved monetary policy credibility. To do this, it first documents the factors that explain monetary policy credibility. Using the standard deviation of individual inflation forecasts as a measure of monetary policy credibility, its shows that the latter is negatively affected by the level of inflation itself, monetary policy uncertainty, and a measure of the unobserved stochastic volatility of inflation. The second phase proceeds by analyzing the determinants of the pass-through using the monetary policy credibility index derived from the first phase. The paper confirms the remarkable achievement that, despite the many shocks that the economy has witnessed, the declining pass-through is indeed explained by the improving monetary policy credibility.

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Section: Determinants Of Monetary Policy Credibilitymentioning

confidence: 97%

Monetary Policy Credibility and Exchange Rate Pass-Through in South Africa

Kabundi¹,

Mlachila²

2018

IMF Working Papers

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“…According to this approach, due to the nature of policy decision-making and its implementation processes, economic policies generate uncertainties, which affect the decisions of firms and individuals (Zhang et al, 2015). Therefore, firms and individuals fundamentally question the ability and commitment of policy makers during high uncertainty periods (Istrefi and Piloiu, 2014). Moreover, increasing economic policy uncertainty (EPU) compels firms to hold more cash and thereby decrease their capital investments, while their cost of capital rises.…”

Section: Introductionmentioning

confidence: 99%

The effect of European and global uncertainty on stock returns of travel and leisure companies

2018

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This article aims to evaluate the impact of economic policy uncertainty (EPU) on the STOXX Europe 600 Travel & Leisure Price Index by utilizing a monthly data set for 20 years through 1997-2016. It is found that both the European and the global EPU have significant negative effects on the stock returns of travel and leisure companies. We demonstrate the significantly superior forecasting power of EPU measures on tourism and leisure stock returns, relative to a rather weak forecasting power of various macroeconomic variables.

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“…Furthermore, our model resolves the "price puzzle" and the "exchange rate puzzle", contrary to the existing literature that shows the existence of these puzzles in monetary transmission in India. 1 This paper is a part of the growing empirical literature on the factors that affect inflation expectations, in line with works by Berk (2000), Istrefi andPiloiu (2014, Leduc andSill (2013), Leduc, Sill, and Stark (2007), Mehra and Herrington (2008), Ueda (2010)), and Istiak and Alam (2019a). The first three of these studies investigate the effect on inflation expectations of short-term nominal interest rates using structural vector autoregression (VAR) models.…”

Section: Introductionmentioning

confidence: 74%

Inflation expectations of households in India: Role of oil prices, economic policy uncertainty, and spillover of global financial uncertainty

Ghosh

Sahu

Chattopadhyay

2020

Bulletin of Econ Res

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Inflation expectations are an important marker for the conduct of monetary policy. Using a Bayesian structural VAR-X model we analyze the macroeconomic factors that determine inflation expectations of the general public in India.Besides the standard macroeconomic factors such as output, inflation rate, monetary policy, and exchange rate, we include economic policy uncertainty as an endogenous variable, while international factors such as oil prices and financial volatility that have spill-over effects are included as exogenous variables. We find that oil prices and the exchange rate have considerable effects on expectations of inflation, and that in a longer horizon, international financial volatility also matters. Our model generates results free from the "price puzzle" and the "exchange rate puzzle" that otherwise exist in the literature on monetary transmission mechanisms for India.

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Economic Policy Uncertainty and Inflation Expectations

Cited by 58 publications

References 38 publications

Monetary Policy Credibility and Exchange Rate Pass-Through in South Africa

Monetary Policy Credibility and Exchange Rate Pass-Through in South Africa

The effect of European and global uncertainty on stock returns of travel and leisure companies

Inflation expectations of households in India: Role of oil prices, economic policy uncertainty, and spillover of global financial uncertainty

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