Gibson's Paradox, Monetary Policy, and the Emergence of Cycles

Hannsgen, Greg

doi:10.2139/ssrn.569104

Cited by 11 publications

(7 citation statements)

References 9 publications

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“…Another similar explanation for the existence of a positive relationship between interest rates and the general level of prices was made by Hannsgen (2004).…”

Section: Literature Review and The Theoretical Frameworksupporting

confidence: 53%

Price Stability Target of the Central Bank and Its Interest Policy Case Study of North Macedonia

Dervishi,

Mustafai

2023

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Continuous increase in the general level of prices or excessive volatility are among the most important problems of the economy. If the price stability is considered as the main objective in monetary policy, first of all, the factors causing instability in the general level of prices should be identified and then appropriate monetary policy tools should be used.The main objective of the Central Bank of North Macedonia, set by law, is to ensure the price stability. To achieve the final target, the Central Bank sets the intermediate target of monetary policy. The Central Bank since January 2002 has been implementing a fixed exchange rate strategy against the Euro. Therefore, ensuring the stability of the exchange rate is one of the intermediate objectives of monetary policy. While the effects of the COVID 19 pandemic were overcome in 2021, the global food crisis that broke out in 2022 affected the whole world, while the North Macedonian Economy experienced high price increases that have not been seen for many years. As a matter of fact, the country reached double-digit inflation in 2022. Inflationary pressures in the economy are mainly caused by the prices of products in which food and energy have a high share in the consumption basket. Due to the increase in prices, the Central Bank of North Macedonia has gradually narrowed its monetary policy since 2022. As a contractionary monetary policy instrument, additional measures were taken in compulsory reserves, particularly in interest rates. In order to ensure the price stability, the monetary policies implemented should be supported by fiscal policies. The government's taking parallel steps with the central bank in this regard will reduce the pressure on prices.

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“…Another similar explanation for the existence of a positive relationship between interest rates and the general level of prices was made by Hannsgen (2004).…”

Section: Literature Review and The Theoretical Frameworksupporting

confidence: 53%

Price Stability Target of the Central Bank and Its Interest Policy Case Study of North Macedonia

Dervishi,

Mustafai

2023

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“…Enflasyon-faiz ilişkisi tartışmalarında Gibson (1923)'dan sonra gelen Fisher (1930), Shiller ve Siegel (1977), Friedman ve Schwartz (1982), Brown ve Santoni (1983), Chen ve Lee (1990), Klein (1995), Hannsgen (2004) de enflasyon-faiz ilişkisi literatürüne önemli katkılar sağlamışlar ve Gibson (1923) ile benzer sonuçlara ulaşmışlardır. Fakat, Keynes (1930), Sargent (1973), Lee ve Petruzzi (1986), Barsky ve Summers (1988) ise, Gibson (1923)'un ulaştığı sonucun tersini bulmuşlar, buna göre nominal faiz oranının fiyatlar genel düzeyini etkilediğini savunmuşlardır.…”

Section: Teori̇k Arkaplan Ve Li̇teratürunclassified

Relationship between inflation and interest rate in Turkey: The validity of Gibson paradox in Turkey

Atgür

2021

Ömer Halisdemir Üniversitesi İktisadi Ve İdari Bilimler Fakültesi Dergisi

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This study aimed to review the relationship between inflation and interest rate and the validity of Gibson Paradox in Turkish economy for the period 2004-2020. They are determined as variables nominal deposit interest rate and consumer price index inflation rate for the econometric model using quarterly data in the study. The methods were used besides the Johansen cointegration test method, ordinary least squares, full modified ordinary least squares, dynamic ordinary least squares, canonical cointegration regression estimation methods and Error Correction Model Granger causality test. Johansen cointegration test result showed that the series of variables in the econometric model are related in long run. Subsequently, ordinary least squares, fully modified ordinary least squares, dynamic ordinary least squares, canonical cointegration regression estimation results showed that the inflation rate positively affected the interest rate. Finally, the Error Correction Model Granger causality test results indicated that there is a causal relationship from the inflation rate to the interest rate direction. The econometric results are evaluated in a general framework, inflation has a positive effect on interest rates and in this framework has revealed that it is valid for Turkey Gibson Paradox in Turkish economy for the period 2004-2020.

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“…A closely related means of monetary transmission could be dubbed the cost-push channel (Barth and Ramey 2002;Taylor 2004, pp. 89-90;Hannsgen 2004). Interest rates, the argument goes, are a component of costs; when they rise, they have the same effect as any other increase in costs.…”

Section: Figurementioning

confidence: 99%