Inflation Dynamics and Implications on Monetary Policy
AbstractThis paper attempts to provide some facts about the current environment where inflation seems to be originating from supply-side factors. It aims in particular to answer whether or not there is a role for monetary policy to contain such inflation and, if yes, how. From this study, it is found that in the past Thailand’s inflation dynamics were largely governed by temporary supply disruptions whose effects on inflation tended to quickly disappear on their own, unless assisted by some other factors such as accommodative monetary policy. During the past five years, however, the nature of these supply shocks has changed in line with the structural shifts in the demand and supply of oil and farm products. As a result, changes in oil and farm prices have themselves become more protracted. Under the circumstance, accommodative monetary policy could keep the impact of supply shocks on inflation even more lasting, and thus the inflation process could become more persistent as well. Therefore, the authorities must maintain high priority on monetary policy discipline and be mindful that persistently high inflation expectations could cause people to become inflation tolerant and ultimately allow inflation to stay high over an extended horizon.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Economic Research Department, Bank of Thailand in its series Working Papers with number 2008-02.
Length: 71 pages
Date of creation: Feb 2008
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carlos Robalo Marques, 2005.
"Inflation persistence: facts or artefacts?,"
Economic Bulletin and Financial Stability Report Articles,
Banco de Portugal, Economics and Research Department.
- Dees, Stephane & Karadeloglou, Pavlos & Kaufmann, Robert K. & Sanchez, Marcelo, 2007. "Modelling the world oil market: Assessment of a quarterly econometric model," Energy Policy, Elsevier, vol. 35(1), pages 178-191, January.
- Perron, Pierre, 1989.
"The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis,"
Econometric Society, vol. 57(6), pages 1361-1401, November.
- Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
- Gali, Jordi & Gertler, Mark, 1999.
"Inflation dynamics: A structural econometric analysis,"
Journal of Monetary Economics,
Elsevier, vol. 44(2), pages 195-222, October.
- Jordi Gali & Mark Gertler, 2000. "Inflation Dynamics: A Structural Econometric Analysis," NBER Working Papers 7551, National Bureau of Economic Research, Inc.
- Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
- Athanasios Orphanides & John C. Williams, 2002.
"Imperfect knowledge, inflation expectations, and monetary policy,"
Working Paper Series
2002-04, Federal Reserve Bank of San Francisco.
- Athanasios Orphanides & John Williams, 2004. "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," NBER Chapters, in: The Inflation-Targeting Debate, pages 201-246 National Bureau of Economic Research, Inc.
- Athanasios Orphanides & John C. Williams, 2003. "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," NBER Working Papers 9884, National Bureau of Economic Research, Inc.
- Athanasios Orphanides & John C. Williams, 2002. "Imperfect knowledge, inflation expectations, and monetary policy," Finance and Economics Discussion Series 2002-27, Board of Governors of the Federal Reserve System (U.S.).
- Orphanides, Athanasios & Williams, John C., 2003. "Imperfect knowledge, inflation expectations, and monetary policy," CFS Working Paper Series 2003/40, Center for Financial Studies (CFS).
- Timothy Cogley & Giorgio E. Primiceri & Thomas J. Sargent, 2010.
"Inflation-Gap Persistence in the US,"
American Economic Journal: Macroeconomics,
American Economic Association, vol. 2(1), pages 43-69, January.
- Sharon Kozicki & P.A. Tinsley, 2002.
"Alternative sources of the lag dynamics of inflation,"
Research Working Paper
RWP 02-12, Federal Reserve Bank of Kansas City.
- Peter Tinsley & Sharon Kozicki, 2003. "Alternative Sources of the Lag Dynamics of Inflation," Computing in Economics and Finance 2003 92, Society for Computational Economics.
- Wensheng Peng & Frank Leung, 2005. "A Monetary Conditions Index for Mainland China," Working Papers 0501, Hong Kong Monetary Authority.
- Gerard O'Reilly & Karl Whelan, 2005.
"Has Euro-Area Inflation Persistence Changed Over Time?,"
The Review of Economics and Statistics,
MIT Press, vol. 87(4), pages 709-720, November.
- O'Reilly, Gerard & Whelan, Karl, 2004. "Has euro-area inflation persistence changed over time?," Working Paper Series 0335, European Central Bank.
- O'Reilly, Gerard & Whelan, Karl, 2005. "Has Euro-area inflation persistence changed over time?," Open Access publications from University College Dublin urn:hdl:10197/211, University College Dublin.
- O'Reilly,Gerard & Whelan, Karl, 2004. "Has Euro-Area Inflation Persistence Changed Over Time?," Research Technical Papers 4/RT/04, Central Bank of Ireland.
- Trostle, Ronald, 2008. "Factors Contributing to Recent Increases in Food Commodity Prices (PowerPoint)," Seminars 43902, USDA Economists Group.
- Hansen, Bruce E, 1997.
"Approximate Asymptotic P Values for Structural-Change Tests,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 15(1), pages 60-67, January.
- Tom Doan, . "RATS programs to replicate Hansen's examples of Andrews-Ploberger test," Statistical Software Components RTZ00087, Boston College Department of Economics.
- Bruce E. Hansen, 1995. "Approximate Asymptotic P-Values for Structural Change Tests," Boston College Working Papers in Economics 297., Boston College Department of Economics.
- repec:cfs:cfswop:wp200340 is not listed on IDEAS
- Batini, Nicoletta, 2002.
"Euro area inflation persistence,"
Working Paper Series
0201, European Central Bank.
- Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
- Hans Genberg & LaurentL. Pauwels, 2005.
"An Open-Economy New Keynesian Phillips Curve: Evidence From Hong Kong,"
Pacific Economic Review,
Wiley Blackwell, vol. 10(2), pages 261-277, 06.
- Hans Genberg & Laurent L. Pauwels, 2003. "An Open Economy New Keynesian Phillips Curve: Evidence from Hong Kong," IHEID Working Papers 03-2003, Economics Section, The Graduate Institute of International Studies.
- Stephen Cecchetti & Guy Debelle, 2005.
"Has the inflation process changed?,"
BIS Working Papers
185, Bank for International Settlements.
- Andrews, Donald W K & Chen, Hong-Yuan, 1994. "Approximately Median-Unbiased Estimation of Autoregressive Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 187-204, April.
- Ma, Adrian, 2002. "GMM estimation of the new Phillips curve," Economics Letters, Elsevier, vol. 76(3), pages 411-417, August.
- Jushan Bai, 1997. "Estimation Of A Change Point In Multiple Regression Models," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 551-563, November.
- Batini, Nicoletta & Nelson, Edward, 2001.
"The Lag from Monetary Policy Actions to Inflation: Friedman Revisited,"
Wiley Blackwell, vol. 4(3), pages 381-400, Winter.
- Nicoletta Batini & Edward Nelson, 2001. "The Lag from Monetary Policy Actions to Inflation: Friedman Revisited," Discussion Papers 06, Monetary Policy Committee Unit, Bank of England.
- Batini, Nicoletta & Jackson, Brian & Nickell, Stephen, 2005. "An open-economy new Keynesian Phillips curve for the U.K," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1061-1071, September.
- repec:fip:fedlps:y:2008:i:feb20 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Pornpinun Chantapacdepong).
If references are entirely missing, you can add them using this form.