Inflation, its volatility and the inflation-growth tradeoff in India

Purpose The purpose of this paper is to reexamine the speed and magnitude of exchange rate pass-through (ERPT) to consumer prices in Ghana. Design/methodology/approach The Johansen Maximum Likelihood approach is employed in the estimation of different models of symmetric and asymmetric ERPT. Specifically asymmetric ERPT models with respect to the direction and size of exchange rate changes are estimated. Findings Results reveal that even though a depreciation in the nominal effective exchange rate will lead to an increase of consumer prices in the long-run, it is not statistically significant. Evidence also suggests a significant asymmetry with respect to direction and size of exchange rate changes. This indicates that the right ERPT model is an asymmetric model. Specifically ERPT is found to be incomplete but relatively higher in periods of depreciation than in periods of appreciation; that is 53 percent against 3 percent. ERPT is also higher during episodes of large changes (about 51 percent). Research limitations/implications It would have been interesting to analyze the impact on consumer prices through changes in import prices. That approach was not adopted due to lack of consistent data on import prices in Ghana. Practical implications It is imperative that the monetary authorities critically monitor exchange rate movements in order to be able to take swift policy action so as to counteract any inflationary pressures from the external sector. In particular, much attention should be paid to events and arrangements that could result in large depreciation of the exchange rate. Originality/value While previous studies have assumed a symmetric ERPT model for Ghana, this paper is unique in that it investigates the most appropriate model for examining ERPT in Ghana whether symmetric or an asymmetric.

Section: Empirical Model Specification and Analytical Frameworkmentioning

confidence: 99%

Section: Empirical Model Specification and Analytical Frameworkmentioning

confidence: 99%

Exchange rate pass-through to consumer prices in Ghana: is there asymmetry?

Amoah

Aziakpono

2018

“…It could be estimated precisely by the ordinary least square (OLS) procedure provided all the variables are integrated of same order d and the residuals expressed as linear combination of all the variables are integrated of order less than d (Engle and Granger, 1987). However, if the variables included have unit roots and show co-movements, applying the OLS procedure would result in a spurious regression (Jha and Kulkarni, 2015). It is to be noted that transmission of exchange rate changes into the price level of an economy involves both the short-run (immediate) and long-run (accumulated) dynamics and that other variables too may show some lagged relationship with the dependent variable (Jha and Kulkarni, 2015).…”

Section: Analytical Framework Data and Econometric Methodologymentioning

confidence: 99%

“…However, if the variables included have unit roots and show co-movements, applying the OLS procedure would result in a spurious regression (Jha and Kulkarni, 2015). It is to be noted that transmission of exchange rate changes into the price level of an economy involves both the short-run (immediate) and long-run (accumulated) dynamics and that other variables too may show some lagged relationship with the dependent variable (Jha and Kulkarni, 2015). Therefore, some adjustment time may be consumed and it would rather be appropriate to consider an econometric methodology that is accommodative to both the immediate and accumulated responses.…”

Section: Analytical Framework Data and Econometric Methodologymentioning

confidence: 99%

On the dynamics of exchange rate pass-through: asymmetric evidence from India

Bhat

2021

PurposeThis paper attempts to examine the transmission of exchange rate changes into the domestic prices together with other important determinants of later, in case of a developing country, namely, India.Design/methodology/approachIn an open economy Philips curve framework, a symmetric model developed by Pesaran et al. (2001) together with a complete asymmetric model developed by Shin et al. (2014) has been applied to assess the transmission of exchange rate changes into the domestic prices (inflation) of India. In addition, non-linear cumulative dynamic multipliers are used to portray the route between disequilibrium position of short run and new long-run equilibrium of the system. The multipliers highlight the asymmetric adjustment paths and/or duration of disequilibrium and therefore add valuable information to the long and short-run asymmetry.FindingsIn symmetric framework, exchange rate pass-through is reported to be incomplete and short-run pass through is found to be lower than the long-run pass through. A contractionary monetary policy stance is observed to decrease inflation in the long-run only and in the short-run, a case for price puzzle is observed, although the coefficient is statistically insignificant. Similarly, the impact of output growth is positive in both the short and long-run and both the coefficients are statically significant. Finally, the oil price inflation is also found to escalate the domestic inflationary pressures in both the short and long run, although the pass-through transmission is lower in the short-run than in the long-run. In case of an asymmetric setting, evidence in favour of directional asymmetry is reported whereby long-run impact of currency appreciation is found to be higher than depreciation. Similarly, a contractionary monetary policy action lowers the inflation, the easy one increases it; however, the impact of both the positive and negative changes in interest rate is found to be symmetric. An increase in GR is found to increase the inflation by a relatively appreciable magnitude than is observed when the fall in GR is reported. The possible reason for this asymmetric response of inflation may be explained in terms of asymmetric behaviour of demand conditions during economic upturns and downturns and downward inflexibility of prices. Finally, the transmission of oil price inflation to domestic inflation is also found to be asymmetric. An increase in oil price inflation leads to an increase in domestic inflation by a higher magnitude. whereas a decrease in it lowers inflation only marginally.Practical implicationsFrom a policy perspective, it is certainly important for the central banks to monitor the exchange rate changes so as to design the appropriate policy actions to resist any inflationary pressures resulting from the external sector. More importantly, a gauge on the factors that lead to destabilizing exchange rate movements or large currency price fluctuations is highly warranted. The results also highlight the relevance of proper domestic demand management and lowering dependence on oil imports to avoid the unnecessary inflation pressures in the economy.Originality/valueWhile some studies have explored the possibilities of asymmetric interactions in the case of India, however, these studies have considered only the partial asymmetric model specifications and have not included a well-established theoretical base to include the other potential determinants of inflation as well. In this regard, the authors applied a complete asymmetric model specification developed by Shin et al. (2014) in an open economy Philips curve framework to assess the transmission of exchange rate changes into the domestic prices (inflation) of India. This paper will enrich the existing literature from a viewpoint of a comprehensive analysis of exchange rate pass-through by taking note of potential asymmetries coupled with other important determinants of inflation.

“…To examine aspects of volatility, Kumar (2012) examined the statistical properties of the volatility index of India to predict market volatility. To investigate the behaviour of inflation volatility, Jha and Kulkarni (2015) tested the significance of inflation volatility for India using the amended New Keynesian Phillips Curve (NKPC) model. Investor sentiment is believed to play an important role in market volatility; Sayim and Rahman (2015) found that positive investor sentiments increase Istanbul Stock Exchange returns.…”

Section: Cluster 2: Financial Marketsmentioning

confidence: 99%

International Journal of Emerging Markets: a bibliometric review 2006–2020

Kumar

Sharma²,

Vashistha³

et al. 2022

PurposeInternational Journal of Emerging Markets (IJoEM) is a leading journal that publishes high-quality research focused on emerging markets. In 2020, IJoEM celebrated its fifteenth anniversary, and the objective of this paper is to conduct a retrospective analysis to commensurate IJoEM's milestone.Design/methodology/approachData used in this study were extracted using the Scopus database. Bibliometric analysis, using several indicators, is adopted to reveal the major trends and themes of a journal. Mapping of bibliographic data is carried using VOSviewer.FindingsStudy findings indicate that IJoEM has been growing for publications and citations since its inception. Four significant research directions emerged, i.e. consumer behaviour, financial markets, financial institutions and corporate governance and strategic dimensions based on cluster analysis of IJoEM's publications. The identified future research directions are focused on emergent investments opportunities, trends in behavioural finance, emerging role technology-financial companies, changing trends in corporate governance and the rising importance of strategic management in emerging markets.Originality/valueTo the best of the authors' knowledge, this is the first study to conduct a comprehensive bibliometric analysis of IJoEM. The study presents the key themes and trends emerging from a leading journal considered a high-quality research journal for research on emerging markets by academicians, scholars and practitioners.