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Patrick Blagrave
Co-movement (synchronicity) in inflation rates among a set of 13 emerging and developing countries in Asia is shown to be strongest for the food component, partly due to common rainfall shocks—a result which the paper terms the ‘monsoon effect.’ Economies with higher trade integration and co-movement in nominal effective exchange rates also experience greater food-inflation co-movement. By contrast, cross-country co-movement in core inflation is weak and the aforementioned determinants have little explanatory power, suggesting a prominent role for idiosyncratic domestic factors in driving core inflation. In the context of the growing literature on the globalization of inflation, these results suggest that common weather patterns are partly responsible for any role played by a so-called ‘global factor’ among inflation rates in emerging and developing economies, in Asia at least.
Patrick Blagrave

of inflation expectations in inflation targetters—these are likely less relevant among emerging market and developing economies. Examining inflation co-movement in a set of emerging and developing economies in Asia, this paper offers a novel explanation for some of the observed co-movement: common rainfall patterns, which the paper terms the ‘monsoon effect.’ Analysis in the paper extends the literature—outlined further below—in three ways. First, by considering the determinants of co-movement in monthly inflation rates between a set of 13 countries in Asia, the

International Monetary Fund. Asia and Pacific Dept

remain cautious of the external and internal risks. They recognize that global economic slowdown is a major external risk to growth with potentially sizeable impact on remittances, exports, as well as foreign investment. In the financial sector, the rapid growth of remittance inflows has created excess liquidity to a certain extent, and sudden fluctuation in the remittance inflows may affect banking sector stability. On the inflation front, they recognize that monsoon effect on agriculture products, higher global fuel prices, and some supply‐side bottlenecks could

Mr. Rodrigo O. Valdes and Mr. Leonardo Hernández

-versa. 17 This is the Monsoonal effect of Masson (1998) . 18 The spread between on- and off-the-run 30-year treasury bonds is a proxy for liquidity premium (off-the-run bonds are those with an effective maturity shorter than 30 years). 19 We follow the market practice of taking 30-year Treasury Bonds as the benchmark. 20 See footnote 2 . 21 See footnote 14 . 22 This explanation does not seem consistent with the result regarding the Brazilian crisis which was largely expected by the markets. A full understanding of this result needs

Bertrand Candelon, Mr. Rabah Arezki, and Mr. Amadou N Sy
This paper studies the spillover effects both within the bond markets for individual U.S. states and between the latter and the market for U.S. Treasury securities. We perform the Forbes and Rigobon (2002) spillover test using daily bond yield data over the period 2005 to 2011. Results are twofold. First, we find that between most markets for individual U.S. state bonds there are negative spillovers. In other words, an increase in borrowing costs in one U.S. state results in better borrowing conditions for other states. Second, we find no substantial spillover effect between shocks originating from state securities and from federal markets, except for a few large issuers. Using causality tests in the frequency domain, we find that the Treasury bond market directly causes changes in the markets for municipal bonds in both the short and long run. There is also some evidence of causality from the municipal to the Treasury bond market, but only of a long-run nature. Our results shed some light on the policy debate on the nature of spillover effects within fiscal unions.
Bertrand Candelon, Mr. Rabah Arezki, and Mr. Amadou N Sy

The Jefferson County, Alabama in November 2011 is the largest-ever U.S. municipal failure. 4 Masson (1999) considers the particular case of “false” shift-contagion, where the increase in cross-correlation may be due to the simultaneous occurrence of macroeconomic shocks across countries. According to the “monsoonal effect” theory, this artifact of shift-contagion is likely to happen as macroeconomic shocks are correlated. 5 Several recent papers have proposed other test for shift contagion. We subsequently discuss the relative performance of

Mr. Serhan Cevik

. ( 2020 ) “ Inflation Co-movement in Emerging and Developing Asia: The Monsoon Effect ,” Applied Economic Letters , Vol. 27 , pp. 1277 – 1283 . Blochliger , H. , and R. Tusz ( 2020 ) “ Regional Development in Lithuania: A Tale of Two Economies ,” OECD Economics Department Working Papers No. 1650 ( Paris : Organization for Economic Co-operation and Development ). Cecchetti , S. , N. Mark , and R. Sonora ( 2002 ) “ Price Index Convergence Among United State Cities ,” International Economic Review , Vol. 43 , pp. 1081 – 1099

Mr. Rodrigo O. Valdes and Mr. Leonardo Hernández
This paper presents evidence on the relative importance of alternative contagion channels during the Thai, Russian, and Brazilian crises. Results show that when crises are measured by changes in sovereign bond spreads, financial competition seems to explain almost all contagion episodes. However, when crises are measured by stock market returns, trade links and neighborhood effects appear to be relevant contagion channels during the Thai and Brazilian crises, while financial competition remains the only relevant channel in the case of the Russian crisis.
Mr. Serhan Cevik
The post-pandemic rise in consumer prices across the world has renewed interest in inflation dynamics after decades of global disinflation. This paper provides a spatial investigation of inflation synchronicity at the city level in Lithuania using disaggregated monthly data during the period 2000–2021. The empirical analysis provides strong evidence that (i) the co-movement of city-level inflation rates—estimated using the instantaneous quasi-correlation approach—is significantly weaker than the extent of synchronization suggested by the simple correlation analysis; (ii) there is substantial heterogeneity in the instantaneous quasi-correlation of inflation subcomponents between city pairs; and (iii) there are significant changes in the degree of city-level synchronization over time, reflecting important economic developments in history such as the global financial crisis, the adoption of euro, and the COVID-19 pandemic.