Browsing by Subject "Inflation (Finance)--Mathematical models."

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Open Access
Analyzing inflation target misses
(2010) Kırımhan, Destan
This thesis identifies the roles of both domestic and global factors in missing the inflation targets with the help of Arellano-Bond fixed effects estimation. Central bank credibility has the largest absolute effect on target misses; exchange rate and fiscal surplus ratio to GDP have the medium absolute effect on target misses. Oil prices seem to have significant but limited effect. This thesis also examines whether there is any difference in the formation of inflation expectations when countries miss their inflation targets with the help of linear ordinary least squares estimation. The results may suggest that when CB does not achieve its target, the total weight put on the lagged inflation will be higher than that of the inflation target. Thus, in this analysis, inflation target misses are causing inflation inertia which leads to a more costly disinflationary monetary policy in the short run. Furthermore, there is some evidence of the asymmetry between inflation target misses in the sense that the weights put on overshooting and undershooting are not the same.
Open Access
Learning, inflation, and the Phillips Curve
(2000) Kaplan, Duygu
The Replicator Dynamics of Evolutionary Game Theory is introduced in a closed economy so as to model how a continuum of firms evolve over time with respect to the pricing strategies. Incorporation- of Replicator Dynamics facilitates modelling microeconomic frictions that lead to a Phillips Curve on the macroeconomic level. I'he firms are boundedly rational players which are learning, and are apt to make mistakes. Mistakes function as a mutation process and prevent a strategy from becoming extinct. An arbitrary non-empty set of consumers face a cash-in-advance constraint and total consumption spending is symmetrically affected by changes in growth rate of money supply which is stochastic. Using a discrete price set, we introduce heterogeneity of firm behaviour in a single homogenous good market. The economy is simulated ibr a large number of finitely many time periods. A Phillips Curve type linkage between infiation and output is recognized at stationary states. The slope of the Phillips Curve is observed to increase as mean of money growth rate gets higher or as the uncertainty in money growth rate is increased. Slope of the Phillips Curve diminishes as price stickiness is intensified by either reducing the mistake level or by increasing the firms' responsiveness to relative payoff realizations.