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Displaying results 1 to 12 of 12.

  1. The asymmetric impact of economic policy and oil price uncertainty on inflation
    evidence from developed and emerging economies
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: February 2023
    Publisher:  CESifo, Munich, Germany

    This paper examines the asymmetric impact of economic policy uncertainty (EPU) and oil price uncertainty (OPU) on inflation by using a Nonlinear ARDL (NARDL) model, which is compared to a benchmark linear ARDL one. Using monthly data from the 1990s... more

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    This paper examines the asymmetric impact of economic policy uncertainty (EPU) and oil price uncertainty (OPU) on inflation by using a Nonlinear ARDL (NARDL) model, which is compared to a benchmark linear ARDL one. Using monthly data from the 1990s until August 2022 for a number of developed and emerging countries, we find that the estimated effects of both EPU and OPU shocks are larger when allowing for asymmetries in the context of the NARDL framework. Further, EPU shocks, especially negative ones, have a stronger impact on inflation than OPU ones and capture some of the monetary policy uncertainty, thereby reducing the direct effect of interest rate changes on inflation. Since EPU shocks reflect, at least to some extent, monetary policy uncertainty, greater transparency and more timely communications from monetary authorities to the public would be helpful to anchor inflation expectations.

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
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    hdl: 10419/271920
    Series: CESifo working papers ; 10276 (2023)
    Subjects: inflation; asymmetries; NARDL; oil price uncertainty; economic policy uncertainty
    Scope: 1 Online-Ressource (circa 29 Seiten), Illustrationen
  2. Functional shocks to inflation expectations and real interest rates and their macroeconomic effects
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: September 2023
    Publisher:  CESifo, Munich, Germany

    This paper applies a recently developed method (Inoue and Rossi, 2021) to estimate functional inflation expectations and ex-ante real interest rate shocks, and then examines their macroeconomic effects in the context of a Functional Vector... more

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    This paper applies a recently developed method (Inoue and Rossi, 2021) to estimate functional inflation expectations and ex-ante real interest rate shocks, and then examines their macroeconomic effects in the context of a Functional Vector Autoregressive model with exogenous variables (Functional VARX). Monthly data from January 1998 to May 2023 for the US, the UK and the euro area are used for the analysis. The estimated impulse responses show significant effects of the functional shocks on both inflation and output. In addition, threshold functional local projections indicate that the effects are nonlinear and depend on central bank credibility. Further, inflation expectations shocks have similar effects to supply (demand) ones when they are driven by long-term (short-term) changes. In the presence of an inverted (steepening) real interest rate term structure, the effects are inflationary (deflationary) and expansionary (recessionary). Finally, the responses of inflation, output and the policy rate are driven primarily by the slope and curvature factors of the term structure shocks, which contain important information not captured by traditional scalar shocks.

     
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    hdl: 10419/282344
    Series: CESifo working papers ; 10656 (2023)
    Subjects: inflation expectations; term structure; real interest rates; functional shocks
    Scope: 1 Online-Ressource (circa 37 Seiten), Illustrationen
  3. Shipping cost uncertainty, endogenous regime switching and the global drivers of inflation
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: November 2023
    Publisher:  CESifo, Munich, Germany

    The recent Covid-19 pandemic has disrupted global supply chains and led to large increases in shipping costs. This paper first provides shipping cost mean and uncertainty measures by using the endogenous regime switching model with dynamic feedback... more

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    The recent Covid-19 pandemic has disrupted global supply chains and led to large increases in shipping costs. This paper first provides shipping cost mean and uncertainty measures by using the endogenous regime switching model with dynamic feedback and interactions developed by Chang et al. (2023). The uncertainty indicator measures overall risk in the shipping market and is shown to represent a useful addition to the existing set of economic and financial uncertainty indices. Both the shipping cost mean and uncertainty measures are then included in structural VAR models for the US, the UK and the euro area to examine the pass-through to headline CPI, core CPI, PPI and import price inflation vis-à-vis other global and domestic shocks. The results suggest that shipping cost uncertainty shocks have sizeable effects on all inflation measures and are characterised by a stronger pass-through than that of other domestic or global shocks. Unlike the latter, they also affect significantly core CPI inflation. These findings imply that shipping cost mean and uncertainty should also be considered by policymakers when assessing the global drivers of inflation.

     
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    hdl: 10419/282486
    Series: CESifo working papers ; 10798 (2023)
    Subjects: shipping cost uncertainty; inflation pass-through; endogenous regime switching
    Scope: 1 Online-Ressource (circa 31 Seiten), Illustrationen
  4. Shadow rates as a measure of the monetary policy stance
    some international evidence
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: July 2022
    Publisher:  CESifo, Center for Economic Studies & Ifo Institute, Munich, Germany

    This paper examines the usefulness of shadow rates to measure the monetary policy stance by comparing them to the official policy rates and those implied by three types of Taylor rules in both inflation targeting countries (the UK, Canada, Australia... more

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    This paper examines the usefulness of shadow rates to measure the monetary policy stance by comparing them to the official policy rates and those implied by three types of Taylor rules in both inflation targeting countries (the UK, Canada, Australia and New Zealand) and others that have only targeted inflation at times (the US, Japan, the Euro Area and Switzerland) over the period from the early 1990s to December 2021. Shadow rates estimated from a dynamic factor model are shown to suggest a much looser policy stance than either the official policy rates or those implied by the Taylor rules, and generally to provide a more accurate picture of the monetary policy stance during both ZLB and non-ZLB periods, since they reflect the full range of unconventional policy measures used by central banks. Further, generalised impulse response analysis based on two alternative Vector Autoregression (VAR) models indicates that monetary shocks based on the shadow rates are more informative than those related to the official policy rates, especially during the Global Financial Crisis and the recent Covid-19 pandemic, when unconventional measures have been adopted.

     
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    hdl: 10419/263769
    Series: CESifo working paper ; no. 9839 (2022)
    Subjects: dynamic factor models; shadow rates; inflation targeting; monetary policy stance
    Scope: 1 Online-Ressource (circa 29 Seiten), Illustrationen
  5. Nonlinearities in the exchange rate pass-through
    the role of inflation expectations
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: January 2022
    Publisher:  CESifo, Center for Economic Studies & Ifo Institute, Munich, Germany

    This paper investigates nonlinearities in the exchange rate pass-through (ERPT) to consumer and import prices by estimating a smooth transition regression model with different inflation expectations regimes for five inflation targeting countries (the... more

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    This paper investigates nonlinearities in the exchange rate pass-through (ERPT) to consumer and import prices by estimating a smooth transition regression model with different inflation expectations regimes for five inflation targeting countries (the UK, Canada, Australia, New Zealand and Sweden) and three non-targeters (the US, the Euro-Area and Switzerland) respectively over the period January 1993-August 2021. Both market and survey measures of inflation expectations are used as the transition variable, and the nonlinear model is also assessed against a benchmark linear model. The pass-through to both consumer and import prices is found to be stronger in the nonlinear model and in some cases is close to being complete. Also, it is stronger for import prices than for consumer prices. Both seem to be more responsive to exchange rate changes when market expectations of both consumers and producers are considered instead of expectations from consumer surveys only. Finally, inflation expectations appear to affect the ERPT more in inflation targeting countries.

     
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    hdl: 10419/252061
    Series: CESifo working paper ; no. 9544 (2022)
    Subjects: exchange rate pass-through; smooth transition regression; nonlinearities; inflation expectations
    Scope: 1 Online-Ressource (circa 28 Seiten), Illustrationen
  6. Forecasting inflation with a zero lower bound or negative interest rates
    evidence from point and density forecasts
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: April 2022
    Publisher:  CESifo, Center for Economic Studies & Ifo Institute, Munich, Germany

    This paper investigates the predictive power of the shadow rate for the inflation rate in countries with a zero lower bound (the US, the UK and Canada) and in those with negative rates (Japan, the Euro Area and Switzerland). Using shadow rates... more

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    This paper investigates the predictive power of the shadow rate for the inflation rate in countries with a zero lower bound (the US, the UK and Canada) and in those with negative rates (Japan, the Euro Area and Switzerland). Using shadow rates obtained from two different models (the Wu-Xia (2016) and the Krippner (2015a) ones) and for different lower bound parameters we compare the out-of-sample forecasting performance of an inflation model including a shadow rate interaction term with a benchmark one excluding it. Both specifications are estimated by OLS (Ordinary Least Squares) and includes a range of macroeconomic factors computed by means of principal component analysis. Both point and density forecasts of the inflation rate are evaluated. The models including the shadow rate interaction term are found to outperform the benchmark ones according to both sets of criteria except in countries operating an official inflation targeting regime. The presence or absence of a zero lower bound affects which type of shadow rate produces more accurate inflation forecasts.

     
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    hdl: 10419/260817
    Series: CESifo working paper ; no. 9687 (2022)
    Subjects: shadow interest rates; zero lower bound; inflation forecasting; density forecasts
    Scope: 1 Online-Ressource (circa 53 Seiten), Illustrationen
  7. Testing for UIP
    nonlinearities, monetary announcements and interest rate expectations
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: April 2021
    Publisher:  CESifo, Center for Economic Studies & Ifo Institute, Munich, Germany

    This paper re-examines the UIP relation by estimating first a benchmark linear Cointegrated VAR including the nominal exchange rate and the interest rate differential as well as central bank announcements, and then a Cointegrated Smooth Transition... more

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    This paper re-examines the UIP relation by estimating first a benchmark linear Cointegrated VAR including the nominal exchange rate and the interest rate differential as well as central bank announcements, and then a Cointegrated Smooth Transition VAR (CVSTAR) model incorporating nonlinearities and also taking into account the role of interest rate expectations. The analysis is conducted for five inflation targeting countries (the UK, Canada, Australia, New Zealand and Sweden) and three non-targeters (the US, the Euro-Area and Switzerland) using daily data from January 2000 to December 2020. We find that the nonlinear framework is more appropriate to capture the adjustment towards the UIP equilibrium, since the estimated speed of adjustment is substantially faster and the short-run dynamic linkages are stronger. Further, interest rate expectations play an important role: a fast adjustment only occurs when the market expects the interest rate to increase in the near future, namely central banks are perceived as more credible when sticking to their goal of keeping inflation at a low and stable rate. Also, central bank announcements have a more sizeable short-run effect in the nonlinear model. Finally, UIP holds better in inflation targeting countries, where monetary authorities appear to achieve a higher degree of credibility.

     
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    hdl: 10419/235397
    Series: CESifo working paper ; no. 9027 (2021)
    Subjects: UIP; exchange rate; nonlinearities; asymmetric adjustment; CVAR (Cointegrated VAR); CVSTAR (Cointegrated Smooth Transition VAR); interest rate expectations; interest rate announcements
    Scope: 1 Online-Ressource (circa 28 Seiten), Illustrationen
  8. Exchange rate parities and taylor rule deviations
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: March 2021
    Publisher:  CESifo, Center for Economic Studies & Ifo Institute, Munich, Germany

    This paper investigates the PPP and UIP conditions by taking into account possible nonlinearities as well as the role of Taylor rule deviations under alternative monetary policy frameworks. The analysis is conducted using monthly data from January... more

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    This paper investigates the PPP and UIP conditions by taking into account possible nonlinearities as well as the role of Taylor rule deviations under alternative monetary policy frameworks. The analysis is conducted using monthly data from January 1993 to December 2020 for five inflation-targeting countries (the UK, Canada, Australia, New Zealand and Sweden) and three non-targeting ones (the US, the Euro-Area and Switzerland). Both a benchmark linear VECM and a nonlinear Threshold VECM are estimated; the latter includes Taylor rule deviations as the threshold variable. The results can be summarised as follows. First, the nonlinear specification provides much stronger evidence for the PPP and UIP conditions, the estimated adjustment speed towards equilibrium being twice as fast. Second, Taylor rule deviations play an important role: the adjustment speed is twice as fast when deviations are small and the credibility of the central bank is higher. Third, inflation targeting tends to generate a higher degree of credibility for the monetary authorities thereby reducing deviations of the exchange rate from the PPP- and UIP-implied equilibrium.

     
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    hdl: 10419/235331
    Series: CESifo working paper ; no. 8961 (2021)
    Subjects: PPP; UIP; nonlinearities; Taylor rules deviations; inflation targeting
    Scope: 1 Online-Ressource (circa 25 Seiten)
  9. Nonlinearities and asymmetric adjustment to PPP in an exchange rate model with inflation expectations
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: February 2021
    Publisher:  CESifo, Center for Economic Studies & Ifo Institute, Munich, Germany

    This paper estimates a model of the real exchange rate including standard fundamentals as well as two alternative measures of inflation expectations for five inflation targeting countries (UK, Canada, Australia, New Zealand, Sweden) over the period... more

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    This paper estimates a model of the real exchange rate including standard fundamentals as well as two alternative measures of inflation expectations for five inflation targeting countries (UK, Canada, Australia, New Zealand, Sweden) over the period January 1993-July 2019. Both a benchmark linear ARDL model and a nonlinear ARDL (NARDL) specification are considered. The results suggest that the nonlinear framework is more appropriate to capture the behaviour of real exchange rates given the presence of asymmetries both in the long- and short-run. In particular, the speed of adjustment towards the PPP-implied long-run equilibrium is three times faster in a nonlinear framework, which provides much stronger evidence in support of PPP. Moreover, inflation expectations play an important role, with survey-based ones having a more sizable effect than market-based ones. Monetary authorities should aim to achieve a high degree of credibility to manage them and thus currency fluctuations effectively. The inflation targeting framework might be especially appropriate for this purpose.

     
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    hdl: 10419/235291
    Series: CESifo working paper ; no. 8921 (2021)
    Subjects: nonlinearities; asymmetric adjustment; PPP; real exchange rate; inflation expectations
    Scope: 1 Online-Ressource (circa 26 Seiten), Illustrationen
  10. Functional oil price expectations shocks and inflation
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: March 2024
    Publisher:  CESifo, Munich, Germany

    This paper investigates the inflation effects of oil price expectations shocks constructed as functional shocks, i.e. as shifts in the entire oil futures term structure (both standard and risk-adjusted). The latter are then included in a vector... more

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    This paper investigates the inflation effects of oil price expectations shocks constructed as functional shocks, i.e. as shifts in the entire oil futures term structure (both standard and risk-adjusted). The latter are then included in a vector autoregressive model with exogenous variables (VARX) to examine the US case. Counterfactual analysis is also carried out to investigate second-round effects on inflation through the inflation expectations channel. These are found to be significant, in contrast to earlier studies based on standard oil price shocks. Additional nonlinear local projections including a shock decomposition exercise show that inflation and inflation expectations are primarily driven by changes in the curvature (level and slope) factor when the latter are anchored (unanchored). These findings provide useful information to policymakers concerning the impact of oil price expectations on inflation and inflation expectations.

     
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    hdl: 10419/296087
    Series: CESifo working papers ; 10998 (2024)
    Subjects: functional shocks; oil price expectations; inflation anchoring; counterfactual analysis
    Scope: 1 Online-Ressource (circa 42 Seiten), Illustrationen
  11. Global food prices and inflation
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: March 2024
    Publisher:  CESifo, Munich, Germany

    This paper uses the endogenous regime switching model with dynamic feedback and interactions developed by Chang et al. (2023) to estimate global food price mean and volatility indicators, the latter measuring uncertainty and risk in the global food... more

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    This paper uses the endogenous regime switching model with dynamic feedback and interactions developed by Chang et al. (2023) to estimate global food price mean and volatility indicators, the latter measuring uncertainty and risk in the global food market. Both are then included in structural VAR models to examine their effects on domestic food price inflation for a range of countries with different food shares in total consumption and in the CPI basket. Next, counterfactual analysis is carried out to assess the effects on core inflation. The results suggest that both global food price mean and volatility shocks have sizeable effects on food price inflation in all countries and persistent second-round effects on core inflation in most countries. An extension of the analysis using disaggregate global food price data shows that the existence of second-round effects is independent of the size of the response of domestic food inflation to global food price shocks. These findings imply that policymakers should distinguish carefully between the two types of global food price shocks (namely mean or volatility) and their effects on core inflation to formulate appropriate policy responses.

     
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    hdl: 10419/296081
    Series: CESifo working papers ; 10992 (2024)
    Subjects: food price volatility; core inflation; endogenous regime switching; second-round effects
    Scope: 1 Online-Ressource (circa 52 Seiten), Illustrationen
  12. Time-varying parameters in monetary policy rules
    a GMM approach
    Author: Anderl, Christina; Caporale, Guglielmo Maria
    Published: May 2023
    Publisher:  CESifo, Munich, Germany

    This paper assesses time variation in monetary policy rules by applying a Time-Varying Parameter Generalised Methods of Moments (TVP-GMM) framework. Using monthly data until December 2022 for five inflation targeting countries (the UK, Canada,... more

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    This paper assesses time variation in monetary policy rules by applying a Time-Varying Parameter Generalised Methods of Moments (TVP-GMM) framework. Using monthly data until December 2022 for five inflation targeting countries (the UK, Canada, Australia, New Zealand, Sweden) and five countries with alternative monetary regimes (the US, Japan, Denmark, the Euro Area, Switzerland), we find that monetary policy has become more averse to inflation and more responsive to the output gap in both sets of countries over time. In particular, there has been a clear shift in inflation targeting countries towards a more hawkish stance on inflation since the adoption of this regime and a greater response to both inflation and the output gap in most countries after the global financial crisis, which indicates a stronger reliance on monetary rules to stabilise the economy in recent years. It also appears that inflation targeting countries pay greater attention to the exchange rate pass-through channel when setting interest rates. Finally, monetary surprises do not seem to be an important determinant of the evolution over time of the Taylor rule parameters, which suggests a high degree of monetary policy transparency in the countries under examination.

     
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    hdl: 10419/279200
    Series: CESifo working papers ; 10451 (2023)
    Subjects: Taylor rules; monetary policy rules; Generalised Methods of Moments; Time-varying parameters
    Scope: 1 Online-Ressource (circa 49 Seiten), Illustrationen