Suchergebnisse

We empirically investigate if the incorporation of inflation
expectations helps improve the forecasting performance of a suite of
univariate inflation models. Since inflation forecasts are instrumental
to the conduct of an effective monetary policy, any possible improvement
in the inflation forecastability may tend to enhance the effectiveness
of monetary policy—by providing forward guidance both to the monetary
authority and the market to effectively anchor inflation expectations.
Our results are robust across specifications of our baseline models,
sample sizes and forecast horizons. The introduction of inflation
expectations, whether contemporaneously or with a 6-months lead improves
the predictive ability—both in-sample and out-of-sample for 6 and
12-month horizons. Deterioration however is observed for a 3- month
horizon, which point towards the weak representation of the expectations
data for a 3- month horizon. JEL Classification: E31, E37 Keywords:
Inflation-expectations, Forecast-performance, Pakistan.

We have empirically examined the role of monetary aggregate(s)
vis-à-vis short-term interest rate as monetary policy instruments, and
the impact of State Bank of Pakistan's transformation into the latter on
their relative effectiveness in terms of inflation in Pakistan. Using
indicators of 'persistent changes' in the underlying behaviours of
variables of interest, we found that broad money consistently explains
inflation in (i) monetary (ii) transitory and (iii) interest rate
regimes. Though its role has receded while moving from the transition to
the interest rate regime, the interest rate instrument seems to be
positively related to inflation, a phenomenon commonly known as price
puzzle. In light of these findings, we recommend that the role of money
should not be completely de-emphasised. JEL Classification: E31, E52.
Keywords: Monetary Policy Instruments, Price Puzzle, ARDL, Pakistan

Purpose
The conventional and new inflation bias theories present two distinct facets to explain the outcome of excess inflation without output gains by a discretionary central banker. First is the temptation to achieve a higher than potential output, and, second is not to let it falter. The authors explicitly account for these two distinct dimensions in empirical formulations both exogenously and endogenously. Specifically, the purpose of this paper is to investigate what monetary discretion can and cannot do in terms of dual objectives – inflation and growth – across boom and bust cycles, both directly and indirectly.


Design/methodology/approach
(i) Segregate the economic activity into boom and bust cycles; (ii) Explicitly account for the two dimensions of conventional and new inflation bias theories; and (iii) model and estimate the direct and indirect effects of monetary discretion across business cycles.


Findings
The results indicate considerable asymmetries in the effects of monetary discretion and distribution thereof across objectives and cycles. The direct impact of monetary discretion tends to induce significantly higher inflation in boom and bust cycles, while it exerts a positive but insignificant effect on output. The inflation effects are more pronounced in boom than bust cycles and vice versa are the output effects. The indirect effects on output via inflation are significantly pernicious, which are more pronounced in expansions than recessions.


Originality/value
In a nutshell, instead of benefiting, monetary discretion tends to harm in terms of both the dual policy objectives, which cautions about its well calculated and constrained use only.

It is argued in the literature that the intensity of regulations and control in an economy is a determinant of the informal sector which however is ignored in most of its estimates. This article uses a new variant of the currency demand approach where 'unemployment' and 'intensity of government control' are used to estimate a shadow economy, alongside a the traditional tax variable. We choose Pakistan since it has a significant share of its activities in the informal sector along with the history of various political and dictatorial regimes. Further, there are examples of bureaucratic control leading to corruption in the economy. It provides an opportunity to study the nexus between regulation intensity and informal economy and present a case study for other developing countries exercising control over the economy through the large size of its public sector. The results show that the intensity of the control variable has statistically and economically significant role in increasing the shadow economy, almost equivalent to the tax coefficient. Once the yearly variation in our estimates is mapped with various political regimes, it seems that the validity of estimates is reinforced considering policy inconsistencies and prominent events of each regime.

PurposeIn this paper, the authors develop and estimate a small open economy dynamic stochastic general equilibrium (DSGE) model with an enriched micro-founded specification to account for foreign remittances, an important source that helps bridge the trade gap in many developing and emerging market economies.Design/methodology/approachAlthough the authors' specification provides a general frame for the analysis of the role of workers' remittances, they motivate and calibrate the model with specific focus on Pakistan, where most of the trade deficit is met through the remittance channel.FindingsThe results indicate that a negative shock to workers' remittances hampers real growth via decreased consumption and imported investment goods, while it builds pressure on exchange rate and hence worsens current account balance. These results indicate that too much dependence on workers' remittances to help meet foreign exchange deficits may potentially leave the economy in doldrums in case sizable negative shocks occur to the flow of foreign remittances.Originality/valueThe authors develop and estimate a small open economy DSGE model with an enriched micro-founded specification to account for foreign remittances, an important source that helps bridge the trade gap in many developing and emerging market economies.

This paper seeks to determine whether in Pakistan gold
protects investors against the risks associated with the exchange rate,
oil shocks, and stock returns by testing the hedging and safe haven
properties of gold returns for the period from August 1997 to May 2016.
The analysis has been done to understand the relationship between
moderate (normal) and extremely tumultuous conditions through least
squares and DCC-GARCH models. The key results indicate that gold acts as
a hedge against exchange rate risk only whereas it acts as a safe haven
in terms of the risks associated with the oil, exchange rate and stock
market shocks—thereby indicating that investors can potentially invest
in gold to hedge against losses emanating from the exchange rate, while
they may avoid potential losses originating from turmoil conditions in
terms of the exchange rate, oil, and stock markets. JEL Classification:
E32, F31. Keywords: Gold Returns, Safe Haven, Hedge, DCC GARCH