She-who-must-be-obeyed does not fully share my interest in the subject.
Gross National Disposable Income. Taking into account the outturn in the first half, the baseline assumptions, survey indicators and model forecasts, real GVA growth is projected at 6.
Forstructural model estimates indicate that real GVA may grow by 7. In the RBI, efforts are underway to develop such a model to enrich analytical inputs for the conduct of future monetary policy Box I.
These models are able to generate outcomes from policy simulations or counterfactuals that are not explicitly susceptible to the Lucas critique of traditional macro-econometric models using reduced-form representations that may not be robust to shifts in the underlying economic structure induced by changes in policy.
The earliest DSGE model, representing an economy without distortions, was the real business cycle model that focused on the effects of productivity shocks Kydland and Prescott, Since then, there has been considerable improvement in specification and estimation techniques.
Current DSGE models embody a wider set of distortions and shocks than earlier generation efforts Christiano et al. Several central banks, both in AEs and EMEs — Bank of Canada; Bank of England; European Central Bank; Central Bank of Chile to name a few — have developed such models for policy analysis and employ them extensively to evaluate alternative policy scenarios and instrument choices.
Drawing on Irelandthe economy is hypothesised to be inhabited by a representative household which maximises a lifetime expected utility function, subject to an inter-temporal budget constraint. The felicity function 7 depends on consumption C and labour l supplied to the intermediate goods producing sector.
The first-order condition of household optimisation consists of i the Euler equation which relates the real interest rate to the inter-temporal marginal rate of substitution; and ii an inter-temporal optimality condition linking the real wage to the marginal rate of substitution between leisure and consumption.
Equations 1 - 5along with the marketclearing condition, constitute the system of equations which can be solved using standard DSGE methods. In this prototype model, it is possible then to run counter-factual exercises, e.
An expansionary monetary policy shock reduces interest rate and raises output, consumption and inflation, as illustrated in Chart B.
Journal of Econometric Society, 50, A caveat is that the baseline growth and inflation trajectories do not incorporate the impact of the likely increases in pay and allowances by State Governments for their employees.
This section makes an assessment of the balance of risks around the baseline projections from a set of plausible alternative scenarios. However, supply disruptions due to geo-political developments with oil demand remaining robust could push crude oil prices higher.
The upward pressures on oil prices could, however, get mitigated by the increased production of shale gas in response to higher prices. Real GVA growth could weaken by around 15 bps in due to the direct impact of higher input costs as well as spillovers from lower world demand. On the downside, the expected demand boost from expansionary US fiscal policy may not materialise, given recent developments in the US.
In China, growth has remained resilient, but concerns over its sustainability remain in view of the large overhang of debt. The ensuing tightening of global financial conditions in a milieu of inward-looking protectionist tendencies could amplify downside risks, especially for EMEs.
Assuming global growth turns out to be 50 bps below the baseline, domestic growth and inflation could fall below the baseline forecasts by around 20 bps and 10 bps, respectively. However, reduced political risks in the euro area could lead to a more sustained and stronger cyclical rebound, providing a boost to global growth.
Assuming that global growth is higher by 25 bps, real GVA growth and inflation could turn out to be around 10 bps and 5 bps, respectively, above the baseline.
Going forward, the normalisation of monetary policy in the US and possibly other central banks in AEs and protectionist policies of major AEs and EMEs could lead to some volatility in the foreign exchange market and downward pressures on the exchange rate.
A depreciation of the Indian rupee by around 5 per cent relative to the baseline could raise inflation by around 20 bps inwhile producing some positive impact on net exports and growth. On the other hand, in view of the robust growth prospects of the Indian economy in a cross-country perspective and the various initiatives to attract foreign direct investment, India is likely to remain an attractive destination for foreign investors and this could lead to an appreciation of the domestic currency.
An appreciation of the Indian rupee by 5 per cent could soften inflation by around 20 bps but also deliver a negative impact of bps on real GVA growth. These food price dynamics may have both structural and cyclical elements, although it is difficult to disentangle them at this juncture.
If the softening in food inflation observed since the second half of is largely structural, then the momentum in food prices in the rest of could be negligible and headline inflation could be below the baseline by up to 2 percentage points.
If however, low food inflation turns out to be largely cyclical, food prices are likely to revert to trend. Assuming that the momentum in the food prices in the coming months is in line with the average of the past five years, headline inflation may turn out to be bps above the baseline.
Assuming that State Governments implement a similar order of increase in their pay and allowances, CPI inflation could go up to bps above the baseline on account of the direct statistical effect of higher house rents with possible indirect effects emanating from higher demand and increase in inflation expectations.
To conclude, the growth outlook is expected to improve in the second half ofalthough it could be weighed down by still sluggish investment and export activity. Higher food prices and the increase in house rent allowances by the Central Government for its employees are expected to result in an increase in headline inflation in the second half of There are upside risks to the inflation outlook from i the lower kharif foodgrains output; ii farm loan waivers by some State Governments and possibility of Central Government stimulus; and iii the implementation of higher pay and allowances by the State Governments for their employees, which will impact the baseline projections of growth and inflation as they materialise.
Illustratively, such models can replicate the economic implications of fiscal stimulus or pass-through of international shocks. Prices and Costs Consumer price inflation fell sharply in the first quarter ofdriven down by a collapse in food inflation and a marked moderation in inflation in other components.
The trajectory reversed in July and August as vegetable prices spiked and prices of other goods and services firmed up.First, the spatial and temporal distribution of the south-west monsoon has been uneven and deficient in some parts of the country, which is expected to lead to a decline in kharif output.
No assurance can be given that such ex pectations will prove to have been correct. Hydro disclaims any obligation to update or re vise any • Wide price differential between LME and SHFE in Q1, increasing further into Q2 Indication of current market prices.
% % % LME%3) Inflation in the European Union has been very low over the past two years, mainly as a result of the drop in energy prices. ACEA Economic and Market Report: Quarter 1 – June 10 All the major EU markets made a significant contribution to Europe’s positive results. Spain saw. The End of a Supercycle Egon von Greyerz.
In a world based on fake paper and fake electronic money as well as fake asset values, the real significance of gold has got lost. Such high sales have not been seen in Germany since the incentive-driven million in , and have been achieved with an after the fall of oil and energy prices, the ECB will have little choice but to acknowledge that their CPI % to million units.
In total, the EU sales market is forecast to account for million new. It has been argued that achieving a position of competitive advantage is a precursor to the significant performance of an organization (Barney, ) and that competitive advantage results from a.