Ismail H. Genc

Time Series Analysis of Inflation Targeting in Selected Countries

Abstract We analyze a set of countries which adopted inflation targeting (IT) as a policy tool. We model the pre‐IT period with ARMA and GARCH methods, and conduct the one‐step ahead forecasting for the remainder of the times series data. The actual and forecasted inflation levels are compared for each country. We find that even though the actual inflation levels are lower than the forecasted ones, there is no statistical evidence to suggest that the adoption of IT causes a structural break in the inflation levels of the countries which adopt IT.

Wine Price and Quality: In Search of a Signaling Equilibrium in 2001 California Cabernet Sauvignon

ABSTRACT Wine varies greatly in price and quality. In the limited sample we study here, 2001 California Cabernet Sauvignon wines rated by an expert in Wine Spectator, price ranges from

Effectiveness of Inflation Targeting in Turkey

7 to

A confidence interval test for the detection of structural breaks

300 per bottle. Similarly, quality ratings on a 100-point scale range from 68 to 96 points. Our purpose here is twofold. First, we wish to estimate empirically a relationship between price and quality rating. Second, we hope to provide a discussion of characteristics of wine markets that might help refocus theoretical economic research on the wine price-quality relationship. Specifically, we suggest a movement away from hedonic pricing methods and their reliance on assumptions of competitive markets and perfect information. Rather, we suggest that imperfect competition and imperfect, asymmetric information characterize wine markets, and that the theoretical underpinnings of empirical work need to recognize this fact.

Economic versus financial integration or decoupling between the US and the GCC

Inflation rate targeting (IT) has recently become a popular monetary policy tool to fight inflation, in advanced as well as emerging market economies, by curtailing inflationary expectations. The evidence of ITs role in anchoring expectations is mixed. In this paper, the authors quantitatively examine ITs effectiveness in reducing Turkish inflation by comparing forecasted inflation to actual inflation. Furthermore, the possibility of a structural change following IT is examined. The authors show that observed levels of inflation would not have been any different from the forecasted ones if IT had not been adopted. They also fail to find a structural break in inflation at the time of the adoption of IT and conjecture that this might be due to the publics earlier belief that the central banks policy would not be inflationary.

Structural Change in MENA Remittance Flows

Abstract This paper develops a simple confidence interval test around the first difference of time series data to identify a structural break over time. Simulations show the robustness of the test. We also apply the test to the popular debate on the adoption of inflation targeting in New Zealand. Using the NZ inflation data, our test fails to find a structural break around the adoption date of the inflation targeting policy. The test rather supports an early reaction to the expected policy change. As the effectiveness of inflation targeting is a controversial issue, the insight provided by our test sheds some light on the debate. Our test has a wide range of possible applications in empirical literature.

A Tacit Monetary Policy of the Gulf Countries: Is There a Remittances Channel?

Although the two biggest economies of the Gulf Cooperation Council (GCC), namely the Kingdom of Saudi Arabia and the United Arab Emirates, are not economically affected by the business cycles in the US, financial interactions are a different story. In this article, we show that while the GCC economies have decoupled from that of the US, the stock markets in them are very much in synchronization with the fluctuations in the US stock market.

The Nature of Trends in the Per Capita Real GDP of Gulf Cooperation Council (GCC) Countries: Some Evidence and Implications

ABSTRACT After independence, the Gulf Cooperation Council (GCC) countries relied heavily on foreign workers from fellow Arab countries. Thus, remittances flowed from the GCC to other countries in Middle East and North Africa (MENA). In the 1980s and 1990s, the labor source switched to South Asia, which we econometrically verify. This deprived several MENA labor exporters of large sums of foreign exchange, adding significant economic, social, and political hardships on non-GCC MENA countries.

Outward Remittances from the Gulf

The strong economic ties between the GCC economies and the U.S. are manifested in three ways: currency peg, coupling of monetary policy, and the adoption of the U.S. dollar as the trading currency for oil. This paper examines how these dynamics result in a misalignment of the U.S. monetary policy with the business cycles of the GCC economies. The study shows how the staggering amount of remittances outflow of the GCC economies plays a stabilizing role as a tacit monetary policy tool. Incorporating remittances in the money demand equation results in a more robust model than otherwise. We further find that the effect of the Federal Funds rate on money demand in these countries diminishes in significance during the period of oil boom between 2002 and 2009. However, the transmission effect of the recession periods in the U.S. into the demand for money in the GCC countries is not statistically significant.

Asymmetries in US Demand for Gasoline

In this paper we attempt to determine whether the per capita real incomes of GCC countries are trend or difference stationary. The distinction is crucial for at least three reasons: first pertains to forecasting; while a trend stationary series tends to return to its long run steady state following a shock, a difference stationary series would tend to carry the impact of such a shock forever. The second has econometric implications because even minor divergences from difference stationarity would lead to non-robust cointegration estimations. The third is about economic theory where the distinction between the neoclassical and endogenous growth models can be settled via empirics of difference or trend stationarity. As the GCC countries strive for more economic integration, correct identification of trends becomes vital in policy making. Our research shows that there is evidence that the per capita real GDP of GCC countries is difference stationary.