This paper analyzes the relationship between money and inflation in a small open economy, where domestic and foreign currencies are perfect substitutes as means of payment. It is shown that, if the path of domestic money supply is such that individuals find it optimal to change the currency in which transactions are settled, there will be an adjustment period during which domestic inflation adj...

Using data from 15 EU countries for 1974-2004, with various specifications and estimation methods this paper gives strong support to the idea that the aggregate inflation-output gap or inflation-unemployment rate relationship is not linear because inflation is relatively more sensitive to markets and regions that are close to a capacity constraint. Accordingly, inflation is not only related to ...

THE MAJOR ECONOMIC ACHIEVEMENT OF 1982 was a dramatic reduction of inflation to its lowest rate in a decade. The 4.6 percent increase in the gross national product (GNP) implicit price deflator between the fourth quarters of 1981 and 1982 was less than half the 10.2 percent rate of increase between the fourth quarters of 1979 and 1980. This decline in inflation has moderated the earlier widespr...

This paper attempts to examine the linkages among inflation, unemployment and crime rates in Malaysia. The sample period covered annual data from 1970 to 2006. The Bartlett corrected trace test proposed by Johansen (2002) was employed as being appropriate for small sample study. The corrected trace test affirmed the existence of long run equilibrium relationship between crime rate and its deter...

This paper assesses the prospects for the new Polish monetary policy strategy of inflation targeting. Regarding the general requirements for implementing an inflation targeting strategy it appears that Poland has made sufficient progress in reducing fiscal dominance and hardening budget constraints. The paper also finds that the exchange rate has played a dominant role as a policy instrument, w...

Describing the nature of the trade-off between inflation and output or unemployment has long been difficult and controversial. The Friedman-Phelps hypothesis, that there is no long-run Phillips curve trade-off between inflation and unemployment, has clearly won over most macro-. economists, but the debate has continued over what, if any, trade-off remains. The subtle notion that an uncertain sh...

Despite the fact that, banks can withstand the effects of inflation in the short run, since banking system mostly operates with reference to interest rate and maturity of financial instruments with less concern about the purchasing power of money. However, the banking system cannot absorb the shocks in the long run. The objective of this paper is to conceptually expose the effect of inflation o...

the main purpose of this research has been to investigate whether inflation targeting improves macroeconomic performance as measured by the behavior of inflation, economic output and their variability among the countries employing inflation targeting. in this regard we have looked for empirical evidence in a world sample of 21 developed and developing inflation targeting countries before and af...

In many economies, the monetary policy instrument is the level of short-term nominal interest rates, but the monetary policy stance might be better characterised by the ex ante real interest rate that this nominal rate implies, relative to some “neutral” or “natural” real rate of interest. In this paper, we estimate the natural rate of interest and the real interest rate gap the difference betw...