Purchasing Power Parity Theory and Applications for Solomon Islands

Paul, Muthucattu Thomas; Kimata, James D.; Khan, M.G.M.

doi:10.22158/jepf.v3n4p507

Cited by 1 publication

(1 citation statement)

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“…According to Paul and Motlaleng (2008), nominal exchange rate changes may not pass through to domestic prices. Paul et al (2017) confirmed that this finding is in line with the work of Paul and Motlaleng (2008) who found that the lack of competition in Bostwana's wholesale sector allows importers to take advantage of the currency appreciation in their profit margins whilst only passing the negative impact of depreciation to consumers. Furthermore, these results highlight areas for future research namely into probing the exchange rate pass through effect in the Solomon Islands and the need to calculate its own REER index to verify the results obtained.…”

Section: Hnkpc Modelsupporting

confidence: 88%

Do Inflation Expectations Matter for Small, Open Economies? Empirical Evidence from the Solomon Islands

Rohoia¹,

Sharma

2021

JRFM

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This paper examines the role of inflation expectations in Solomon Islands, a Pacific Island Country, using the Hybrid New Keynesian Phillips Curve model. The study applies the Generalized Method of Moments to estimate the Hybrid New Keynesian Philips Curve model using quarterly time series data for the period 2003–2017. The study confirms the existence of a Hybrid New Keynesian Philips Curve for Solomon Islands and finds that both backward-looking and forward-looking processes matter for inflation. Fuel prices and output gap are important indicators of current inflation. The study highlights key areas to further investigate including the weak monetary transmission mechanism and to examine the exchange rate pass through effect onto domestic prices. Studies on the role of inflation expectations in small, open, economies of the Pacific, such as Solomon Islands, is limited. This paper fills this void in literature by using quarterly time-series data to build a Hybrid New Keynesian Philips Curve model for Solomon Islands.

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Section: Hnkpc Modelsupporting

confidence: 88%