Universität zu Köln

Asfuroglu, Dila (2018). Essays on Inflation in Emerging Markets and Developing Countries. PhD thesis, Universität zu Köln.

Preview

PDF Dissertation-Dila_Asfuroglu.pdf Download (1MB)

Abstract

This dissertation consists of three self-contained chapters contributing to the analysis in monetary macroeconomics. In these chapters concerning with research questions on inflation in emerging markets and developing countries, I aim to better understand the redistributive effects of anticipated inflation on individual behaviours together with welfare consequences; proximate, socio-economical and political drivers of inflation; and the best response of monetary policy makers with respect to monetary targets in foreign aid-recipient countries. Chapter 2 shows that anticipated inflation rate has long-run real impacts, disproportionately affects heterogeneous households by redistributing from lenders to borrowers; and whether the inflation rate can be used as an instrument to improve utilitarian welfare relies on the presence of money demand in the form of money-in-utility model, the concern with pro-lender/borrower bias, the relationship between intertemporal elasticity of substitutions and the heterogeneous productivity levels. In other words, the policy planner should be concerned about these features when targeting an inflation rate to account for the welfare effects of that policy implication. Chapter 3 incorporates different theories which refer to the proximate determinants; and socio-economical and political determinants to improve the knowledge on inflation dynamics. Inflation is stressed to be mainly driven by money growth and inflation persistence. From the political perspective, greater democratization is found to lead to inflation as the inequality gap rises. The insignificance of the impact from de juro central bank independence on inflation is supported. Inflation inertia with its greatest magnitude and significance suggest that the inflationary expectations and indexations schemes in price and wage are the most critical determinants of inflation in emerging and developing economies. Chapter 4 optimizes the policy parameters of the Taylor rule, namely interest rate smoothing, inflation targeting and output growth targeting in order to maximize unconditional welfare under three cases: only cost-push shock (CP), only foreign aid shock (FA); and cost-push and foreign aid shocks (CP+FA). The findings demonstrate that aid recipient developing countries also face a trade-off between stabilizing the inflation rate and output growth in the presence of cost push shock while the foreign aid shock is found to resolve this trade-off, leading to the conclusion that foreign aid recipient developing countries should act in favor of the inflation targeting as in industrialized countries.

Item Type:	Thesis (PhD thesis)
Creators:	Creators Email ORCID ORCID Put Code Asfuroglu, Dila dilaasf@yahoo.com UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-81731
Date:	10 April 2018
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Faculty of Management, Economics and Social Sciences
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language anticipated inflation, heterogeneous households, welfare analysis UNSPECIFIED panel vector autoregression, inflation determinants UNSPECIFIED Taylor rule, New Keynesian model, foreign aid, optimal monetary policy UNSPECIFIED
Date of oral exam:	16 March 2018
Referee:	Name Academic Title Schabert, Andreas Prof. Dr. Krause, Michael Prof.
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/8173