Rethinking The Current Inflation Target Range In South
Africa
Lumengo Bonga-Bonga, Ntsakeseni Letitia Lebese
The Journal of Developing Areas, Volume 53, Number 2, Spring 2019, pp.
13-27 (Article)
Published by Tennessee State University College of Business
DOI:
For additional information about this article
Access provided by Ebsco Publishing (11 Sep 2018 13:19 GMT)
https://doi.org/10.1353/jda.2019.0018
https://muse.jhu.edu/article/702993
https://doi.org/10.1353/jda.2019.0018
https://muse.jhu.edu/article/702993
T h e J o u r n a l o f D e v e l o p i n g A r e a s
Volume 53 No. 2 Spring 2019
RETHINKING THE CURRENT INFLATION
TARGET RANGE IN SOUTH AFRICA
Lumengo Bonga-Bonga
Ntsakeseni Letitia Lebese
University of Johannesburg, South Africa
ABSTRACT
Critics argue that inflation targeting is not an appropriate monetary policy framework for
developing countries. They maintain that developing countries are more susceptible to the negative
effects of external shocks due to the uncertainty perceived by investors with respect to their
political and economic stability. It is in this line that this paper assesses whether the 3%-6%
inflation target is the optimal inflation target band in South Africa. To determine the optimal level
of inflation target in South Africa, this paper follows the methodology developed by Ball and
Mankiw (2002), which rests on the premise that there is a short run trade-off between inflation and
unemployment. Ball and Mankiw (2002) show that there exists a level of unemployment that is
consistent with stable inflation. The unemployment level that corresponds with a stable inflation is
known as the non-accelerating inflation rate of unemployment (NAIRU). Thus, this paper uses an
expectations-augmented Phillips curve to estimate a time-varying NAIRU for South Africa from
1980 to 2015. We use the headline inflation rate and the official unemployment rate based on the
narrow definition to evaluate the appropriateness of the current inflation target range. Quarterly
data from 1980 to 2015 sourced from Quantec is used to this end. The results of the empirical
analysis indicate that, if South Africa were to put in place an inflation target range based on the
NAIRU, it would have to target an inflation rate that ranges from 1.4 to 11.5 percent. This range is
different to the official inflation target of 3% to 6% adopted by the South African Reserve Bank
(SARB). Furthermore, this paper finds that the Phillips curve is not vertical in South Africa, as
actual inflation does not depend solely on inflation expectations. The policy implication of the
findings of this paper is that the South African Reserve Bank should think about revising its current
inflation target, as it is too narrow for an emerging economy. The current low range of inflation
target could have a negative effect on output and unemployment.
Macroeconomic stability in the DRC: highlighting the role of exchange rate an...IJRTEMJOURNAL
This study is part of a macroeconomic approach and seeks to identify the role of the rate of
economic growth and the exchange rate in controlling the macroeconomic framework. The approaches adopted
in this paper are part of Keynesian thinking on macroeconomic stability using the macroeconomic stability
index proposed by Burnside and Dollars (2004) and A. Amine (2005). Our results argue that economic growth
is causing macroeconomic stability and that the exchange rate is negatively and significantly accounting for
macroeconomic stability in the Democratic Republic of Congo.
impact of monetary policy on economic growth: a case study of south Africa
ini hasil diskusi bersama untuk menyelesaikan studi kasus makroekonomi, khususnya kebijakan moneter
Foreign Aid and Fiscal Behaviour in Nigeria: An Impact Assessment of Deregula...iosrjce
The study examined the influence of deregulation on the relationship between foreign aid and fiscal
behaviour in Nigeria. The equation which described foreign aid as function of important fiscal variables and
other macroeconomic variables is derived from the famous two-gap model. Chow test is used to examine if there
is any structural changes since the adoption of deregulation that has significantly affected the relationship
between foreign aid and fiscal behaviour. The result shows that deregulation has positively and significantly
affected the impact of fiscal behaviour in Nigeria on foreign aid accessibility. But the effect has been short-lived
recently owing to the recent drastic fall in foreign aid available to Nigeria despite the sustained increase in both
government revenue and expenditure. It is recommended that assessment of other shocks that can affect the
fiscal behaviour in Nigeria should be conducted with a view to getting the reason why deregulation fails to
maintain positive relationship that exists between fiscal behaviour and foreign aid in Nigeria.
Macroeconomic stability in the DRC: highlighting the role of exchange rate an...IJRTEMJOURNAL
This study is part of a macroeconomic approach and seeks to identify the role of the rate of
economic growth and the exchange rate in controlling the macroeconomic framework. The approaches adopted
in this paper are part of Keynesian thinking on macroeconomic stability using the macroeconomic stability
index proposed by Burnside and Dollars (2004) and A. Amine (2005). Our results argue that economic growth
is causing macroeconomic stability and that the exchange rate is negatively and significantly accounting for
macroeconomic stability in the Democratic Republic of Congo.
impact of monetary policy on economic growth: a case study of south Africa
ini hasil diskusi bersama untuk menyelesaikan studi kasus makroekonomi, khususnya kebijakan moneter
Foreign Aid and Fiscal Behaviour in Nigeria: An Impact Assessment of Deregula...iosrjce
The study examined the influence of deregulation on the relationship between foreign aid and fiscal
behaviour in Nigeria. The equation which described foreign aid as function of important fiscal variables and
other macroeconomic variables is derived from the famous two-gap model. Chow test is used to examine if there
is any structural changes since the adoption of deregulation that has significantly affected the relationship
between foreign aid and fiscal behaviour. The result shows that deregulation has positively and significantly
affected the impact of fiscal behaviour in Nigeria on foreign aid accessibility. But the effect has been short-lived
recently owing to the recent drastic fall in foreign aid available to Nigeria despite the sustained increase in both
government revenue and expenditure. It is recommended that assessment of other shocks that can affect the
fiscal behaviour in Nigeria should be conducted with a view to getting the reason why deregulation fails to
maintain positive relationship that exists between fiscal behaviour and foreign aid in Nigeria.
Inflation Rate, Foreign Direct Investment, Interest Rate, and Economic Growth...ijtsrd
The article aimed to investigate the relationship between inflation rate, foreign direct investment, interest rate, and economic growth of ten 10 emerging Sub Sahara African countries for the period 1998 to 2018. The random effects GLS regression estimator was employed to examine the equilibrium relationship between the variables. From the results, foreign direct investment had a significantly positive influence on GDP, while the inflation rate and interest rate trivially positively predicted GDP. Based on these findings, the study recommended that the government of emerging nations should put prudent measures to improve inflation, interest rate, and foreign direct investment within the economy for sound wellbeing. Ofori Charles | Shuibin Gu | Takyi Kwabena Nsiah | Eric Dwomoh "Inflation Rate, Foreign Direct Investment, Interest Rate, and Economic Growth in Sub Sahara Africa: Evidence from Emerging Nations" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-6 , October 2020, URL: https://www.ijtsrd.com/papers/ijtsrd31105.pdf Paper Url: https://www.ijtsrd.com/economics/international-economics/31105/inflation-rate-foreign-direct-investment-interest-rate-and-economic-growth-in-sub-sahara-africa-evidence-from-emerging-nations/ofori-charles
Dynamic Impact of Money Supply on Inflation: Evidence from ECOWAS Member Statesiosrjce
According to the monetarists, inflation is essentially a monetary phenomenon in the sense that a
continuous rise in the general price level is due to the rate of expansion in money supply far in excess of the
money actually demanded by economic units. But the link between changes in money supply and inflation is not
instantaneous. This study, therefore, assessed this dynamic linkage between money supply and inflation in
ECOWAS member states; West African Monetary Zone (WAMZ) and West African Economic Monetary Union
(WAEMU) for the period 1980-2012. The stationary properties of the series are explored both at univariate and
panel sense using KPSS and ADF; IPS and LLC. The results revealed that money supply and inflation are
stationary at the level for individual countries and at panel sense. The random effect model for ECOWAS
member states shows that the impact of money supply on inflation is effective in the current and first period.
While the impact is effective in the first period for WAMZ, WAEMU experiences the impact in current period.
The finding also reveals that there are significant specific-country effects on the variables. This implies that the
objective of macroeconomic convergence is yet to be achieved. The paper, therefore recommends that inflation
should be used as an operational guide in evaluating the effectiveness of monetary policy and also a strong
monetary cooperation programme among ECOWAS member states should be evolved.
An Analysis of the Relationship between Fiscal Deficits and Selected Macroeco...IOSR Journals
This study investigates the relationship that exists between the Government Deficit Spending and selected macroeconomic variables such as Gross Domestic Product (GDP), Exchange Rate, Inflation, Money Supply and Lending Interest Rate. The period covered is 1970 (when the civil war ended) and 2011. Ordinary Least Squares (OLS) technique was adopted to analyze the relationships. The study concludes that Government Deficit Spending (GDS) has positive significant relationship with GDP. Government Deficit Spending also has positive significant relationship with Exchange Rate, Inflation, and Money Supply. Government Deficit has negative significant relationship with Lending Interest Rate and most likely crowd-out the private sector by raising the cost of funds. Deficit spending has been known to have adverse effects on the economy and government is advised to curtail excessive deficit spending. It is recommended that further research is done to establish other variables that are affected by government deficit spending.
This study examined the effect interest rate on economic growth in Nigeria. Augmented Dickey – Fuller (ADF), Bound Test and Autoregressive Distributed Lag (ARDL) were employed to examine the effect of impact of interest rate on economic growth in Nigeria. The unit root test showed gross domestic product was 1(0) while interest rate, investment and gross capital formation were 1(1). The result of the Bound Test indicated long run relationship among the macroeconomic variables employed in the study. The result of the ARDL indicated that interest rate had negative effect on economic growth both in short run and long run. However, in the long run investment and gross capital formation were established to have positive effect on economic growth with gross capital formation being insignificant. It was concluded that interest rate has a macroeconomic tool is not effective in stimulating economic growth in Nigeria. It was recommended that the level of interest rate should be adequately controlled for the purpose of stimulating economic growth without inflationary pressure. Finally, robust macroeconomic policies aimed at ensuring economic stability should be formulated in order to increase capital formation and attract investment in order to promote economic growth.
The objective of this study is to identify the determinants of inflation in West Africa, mainly in the WAEMU zone, in order to contribute to improving the conduct of monetary policy. The equation of the exchange of the Quantitative Theory of the Currency and the generalized method of moments (MMG) in dynamic panel is used. Annual data concerning six countries in West Africa and range from 1991 to 2015. The results of the estimation show that in addition to the economic growth rate and the money supply, the devaluation has a significant effect on inflation. As we can see, inflation is not systematically a monetary phenomenon in West Africa. The authorities must therefore seek to determine the optimal threshold for the rate of increase of the money supply.
Effect of Government Policies on Price Stability in Nigeriaijtsrd
This study examined the effect of monetary and fiscal policies on price stability in Nigeria using a data rich framework spanning from 1986 2020. The main problem with the macro economic policies that prompted this study was the fact that despite the series of the CBN Monetary Policy Committee decisions and government tax and expenditure implementation there is apparently no useful effect on inflation price . The study employed Auto regression Distributed Lag ARDL Bound Test for Co integration of data analysis depending upon the time series properties of the data that confer mixed order of integration in addition to the conduct of the unit root test and Error Correction Model ECM estimation. The ADF test revealed that LNCPI, EXR, GSDMD, GEXP, GTX and M2 were stationary at 1 1 while RIR, MPR and BOP at 1 0 . Pesaran, Shin and Smith 2001 established that the ARDL bounds technique allows a mixture of 1 1 and 1 0 variables as regressors. Hence, we proceed to perform the ARDL bounds test for integration. The results of the ARDL bounds revealed that the null hypotheses were all rejected implying that a long run effect exists among monetary and fiscal policies variables and CPI in a multivariate framework. ECM coefficient of 0.2942 conforms with expectation. Durbin Watson statistic 0f 1 9925 revealed that the model seems not to have any case of autocorrelation. The result of our analysis shows that fiscal policy rather than monetary policy exerts a more potent effect on price stability in Nigeria. The study recommends that both monetary and fiscal policies should be complementary in order to be effective in taming inflation in Nigeria. Onehi, Damian Haruna | Ibenta, Steve Nkem | Adigwe, Patrick, K. | Emejulu, Ikenna Justin "Effect of Government Policies on Price Stability in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-7 | Issue-1 , February 2023, URL: https://www.ijtsrd.com/papers/ijtsrd52766.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/52766/effect-of-government-policies-on-price-stability-in-nigeria/onehi-damian-haruna
ANALYZING AND MEASURING THE CAUSAL RELATIONSHIP BETWEEN INFLATION AND UNEMPLO...indexPub
This study aims to analyze and measure the causal relationship between the inflation rate and the unemployment rate in Iraq for the period 2004-2021, utilizing the Phillips curve methodology to analyze the causal relationship between inflation and unemployment rates.The study found a weak inverse relationship between the inflation and unemployment rates in Iraq during the period 2004-2021, indicating a relative decoupling of the impact between changes in inflation and unemployment.
This study empirically investigates the impact of human development on bank development in WAEMU countries. Over the period 1990 to 2014, empirical results have shown a positive relationship between banking development and human development. Credit to the private sector and the size of the economic system have a positive and significant impact on human development, but this impact remains small. Moreover, the growth rate of GDP per capita and the level of inflation have a positive impact on human development.
Budget Deficit and Economic Growth in Liberia: An Empirical InvestigationAJHSSR Journal
: This paper investigates the relationship between budget deficits and economic growth in Liberia.
The study employed: the Classical Ordinary Least Squares Technique (OLS); The Augmented Dickey Fuller
(ADF) and Phillip Perron unit root tests for stationarity; the Co-integration test using Engle-Granger Two-Step
procedure (EGTS); and a parsimonious Error Correction Model of the relationship between Budget deficit and
economic growth in Liberia. It is evident from the analysis that there exists a long run relationship between Budget
deficit and economic growth in Liberia. There also exists a positive and significant relationship between Budget
deficit and economic growth in Liberia. Therefore, a 1.0 percent increase in deficits will result in an increase of
approximately 0.42 percent in economic growth in Liberia. The study recommends that government, policy makers
and the monetary authorities should ensure an appropriate mix of monetary and fiscal policies such that would
deliberately and strategically maximize the growth potentials of deficits in Liberia.
JEL Classification : C2, E1, E2, O4, O5
KEYWORDS: Budget Deficit, Economic
Foreign capital flows depends on the prevailing monetary forces as supported by capital flows
theory and the mechanism linking these two variables is that contraction of net domestic assets through an
open market sale of bonds will place upward pressure on domestic interest rates. Higher interest rates attract
foreign funds, generating a capital inflow which relieves the pressure on domestic interest rates. Has this
actually happened? It is against this backdrop that the present study investigated the impact of monetary policy
on international capital inflows in Nigeria for a period of 22 years (1994-2015) using time series data. The
autoregressive distributed lag technique revealed that the short-run and long-run significant determinants of
foreign capital inflows are largely from broad money supply, nominal exchange rate, inflation rate and interest
rates spread except inflation rate that is insignificant in the long-run. This outcome upholds theoretical
prediction. Long-run equilibrium relationship was found between the dependent variable and the regressors.
Further examination of the short run dynamics of the model showed that the speed of adjustment coefficients
ECM (-1) to restore equilibrium have a negative sign and statistically significant at 1% level, ensuring that
long-run equilibrium can be attained and about 89% of the short-run deviation from the equilibrium (long-run)
position is corrected annually to maintain the equilibrium. Since the empirical evidence revealed that monetary
aggregates such as broad money supply, nominal exchange rate, inflation rate and interest rates spread
influence foreign capital inflows, it is therefore recommended that government should continue to pursue
expansionary monetary policy and foreign exchange policies that would ensure competitiveness of the
economy in order to attract the much needed foreign capital inflows that would engender economic growth.
Monetary Policy Shocks and Agricultural Output Growth in Nigeriaiosrjce
This paper investigated the transmission channel of monetary policy shocks to agricultural output
growth over the period 1970 – 2012. Data were drawn from the Central Bank of Nigeria Statistical Bulletin,
2013. The study estimated a VAR model and showed that producers are able to effectively transfer increases in
cost of production to the final consumer through increased prices; and that though monetary policy shocks,
interest rate and consumer prices have dominant impacts on agricultural output growth in Nigeria, but that
monetary policy shocks transmitted through the interest rate channel are more effective. It was therefore
recommended that monetary policy efforts to revitalize the agricultural sector should focus more on the use of
differential interest rates amongst other policy tools.
Review all of the Discussions Conflict Resolution Resources – I.docxzmark3
Review all of the Discussions: Conflict Resolution Resources – Influencers, TED Talks, and Websites. After reviewing all the resources presented, create your thread.
This week, identify the one resource that impacted you the most that you shared and identify one resource that impacted you the most that was shared by one of your peers and make it using 500 words
In your thread:
Introduce your classmates to the resource you shared that is the most impactful
Introduce your classmates to the resource that was shared by one of them that was the most impactful
Explain why you selected these resources
Explain how these resources impacted your thoughts and ideas on conflict resolution
Explain how these resources are personally applicable to you
Use this information to incorporate into the questions:
The resource that I shared that is the most impactful are the influencers Candace Owens and Brandon Tatum. The first influencer is Brandon Tatum he is known for being an American conservative political commentator, former police officer and football player. He Born in Forth Worth, Texas, Tatum was an All-American football player in high school. His father, Bobby Tatum, was a captain in the Fort Worth Fire Department. His great uncle, Jack Tatum, was an Ohio State All-American, NFL All-Pro, and a Super Bowl champion with the Oakland Raiders. Tatum was featured in the US-Army All-American Game, which showcases the top 78 high school football players in the nation. Tatum committed to playing on a full athletic scholarship from the University of Arizona in 2004. Tatum played at Arizona for 5 years and entered the NFL Draft in 2010. After he After going undrafted in the NFL Draft, Tatum became a police officer in Tucson, Arizona. He rose to prominence in early 2016 for a viral video about a campaign rally for U.S. President Donald Trump. Following the rally, he said in the video that he felt unsafe because of those who protested against the event. He went viral a second time in September 2017 for a video where he expressed his opposition to players "taking the knee" during the national anthem at NFL football games. Tatum later then Tatum resigned from the Tucson Police Department in October 2017 to join Liftable Media a conservative content producer that owns and operates The Western Journal and The Conservative Tribune. He then served, as director of urban engagement for the conservative action group Turning Point USA before founding his own media company in late 2019 and sells his own shirts and hats.
The second social media influencer I chose is Candace Owen. She is a American conservative author, political commentator, and activist. She was along with With her siblings, Owens was raised in Stamford, Connecticut, by her grandparents from around the age of 11 or 12, after her parents divorced. She was the third of four children. She said her paternal grandfather Robert Owens, a Black American, was born in North Carolina. Owens is also of Carib.
Review 3 to 4 stories on both the Media Matters (httpmediamatte.docxzmark3
Review 3 to 4 stories on both the Media Matters (
http://mediamatters.org
) and Newsbusters (
newsbusters.org
) websites. What stories did you review? Do the stories noted by each of the organizations as evidence of liberal or conservative bias in the media truly support this argument? Might some individuals argue that the stories noted as evidence of either liberal or conservative bias are actually factual rather than biased? To what extent do you feel media bias is based on each individual’s own ideological position?
.
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According to the monetarists, inflation is essentially a monetary phenomenon in the sense that a
continuous rise in the general price level is due to the rate of expansion in money supply far in excess of the
money actually demanded by economic units. But the link between changes in money supply and inflation is not
instantaneous. This study, therefore, assessed this dynamic linkage between money supply and inflation in
ECOWAS member states; West African Monetary Zone (WAMZ) and West African Economic Monetary Union
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panel sense using KPSS and ADF; IPS and LLC. The results revealed that money supply and inflation are
stationary at the level for individual countries and at panel sense. The random effect model for ECOWAS
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The study employed: the Classical Ordinary Least Squares Technique (OLS); The Augmented Dickey Fuller
(ADF) and Phillip Perron unit root tests for stationarity; the Co-integration test using Engle-Granger Two-Step
procedure (EGTS); and a parsimonious Error Correction Model of the relationship between Budget deficit and
economic growth in Liberia. It is evident from the analysis that there exists a long run relationship between Budget
deficit and economic growth in Liberia. There also exists a positive and significant relationship between Budget
deficit and economic growth in Liberia. Therefore, a 1.0 percent increase in deficits will result in an increase of
approximately 0.42 percent in economic growth in Liberia. The study recommends that government, policy makers
and the monetary authorities should ensure an appropriate mix of monetary and fiscal policies such that would
deliberately and strategically maximize the growth potentials of deficits in Liberia.
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Foreign capital flows depends on the prevailing monetary forces as supported by capital flows
theory and the mechanism linking these two variables is that contraction of net domestic assets through an
open market sale of bonds will place upward pressure on domestic interest rates. Higher interest rates attract
foreign funds, generating a capital inflow which relieves the pressure on domestic interest rates. Has this
actually happened? It is against this backdrop that the present study investigated the impact of monetary policy
on international capital inflows in Nigeria for a period of 22 years (1994-2015) using time series data. The
autoregressive distributed lag technique revealed that the short-run and long-run significant determinants of
foreign capital inflows are largely from broad money supply, nominal exchange rate, inflation rate and interest
rates spread except inflation rate that is insignificant in the long-run. This outcome upholds theoretical
prediction. Long-run equilibrium relationship was found between the dependent variable and the regressors.
Further examination of the short run dynamics of the model showed that the speed of adjustment coefficients
ECM (-1) to restore equilibrium have a negative sign and statistically significant at 1% level, ensuring that
long-run equilibrium can be attained and about 89% of the short-run deviation from the equilibrium (long-run)
position is corrected annually to maintain the equilibrium. Since the empirical evidence revealed that monetary
aggregates such as broad money supply, nominal exchange rate, inflation rate and interest rates spread
influence foreign capital inflows, it is therefore recommended that government should continue to pursue
expansionary monetary policy and foreign exchange policies that would ensure competitiveness of the
economy in order to attract the much needed foreign capital inflows that would engender economic growth.
Monetary Policy Shocks and Agricultural Output Growth in Nigeriaiosrjce
This paper investigated the transmission channel of monetary policy shocks to agricultural output
growth over the period 1970 – 2012. Data were drawn from the Central Bank of Nigeria Statistical Bulletin,
2013. The study estimated a VAR model and showed that producers are able to effectively transfer increases in
cost of production to the final consumer through increased prices; and that though monetary policy shocks,
interest rate and consumer prices have dominant impacts on agricultural output growth in Nigeria, but that
monetary policy shocks transmitted through the interest rate channel are more effective. It was therefore
recommended that monetary policy efforts to revitalize the agricultural sector should focus more on the use of
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Review all of the Discussions Conflict Resolution Resources – I.docxzmark3
Review all of the Discussions: Conflict Resolution Resources – Influencers, TED Talks, and Websites. After reviewing all the resources presented, create your thread.
This week, identify the one resource that impacted you the most that you shared and identify one resource that impacted you the most that was shared by one of your peers and make it using 500 words
In your thread:
Introduce your classmates to the resource you shared that is the most impactful
Introduce your classmates to the resource that was shared by one of them that was the most impactful
Explain why you selected these resources
Explain how these resources impacted your thoughts and ideas on conflict resolution
Explain how these resources are personally applicable to you
Use this information to incorporate into the questions:
The resource that I shared that is the most impactful are the influencers Candace Owens and Brandon Tatum. The first influencer is Brandon Tatum he is known for being an American conservative political commentator, former police officer and football player. He Born in Forth Worth, Texas, Tatum was an All-American football player in high school. His father, Bobby Tatum, was a captain in the Fort Worth Fire Department. His great uncle, Jack Tatum, was an Ohio State All-American, NFL All-Pro, and a Super Bowl champion with the Oakland Raiders. Tatum was featured in the US-Army All-American Game, which showcases the top 78 high school football players in the nation. Tatum committed to playing on a full athletic scholarship from the University of Arizona in 2004. Tatum played at Arizona for 5 years and entered the NFL Draft in 2010. After he After going undrafted in the NFL Draft, Tatum became a police officer in Tucson, Arizona. He rose to prominence in early 2016 for a viral video about a campaign rally for U.S. President Donald Trump. Following the rally, he said in the video that he felt unsafe because of those who protested against the event. He went viral a second time in September 2017 for a video where he expressed his opposition to players "taking the knee" during the national anthem at NFL football games. Tatum later then Tatum resigned from the Tucson Police Department in October 2017 to join Liftable Media a conservative content producer that owns and operates The Western Journal and The Conservative Tribune. He then served, as director of urban engagement for the conservative action group Turning Point USA before founding his own media company in late 2019 and sells his own shirts and hats.
The second social media influencer I chose is Candace Owen. She is a American conservative author, political commentator, and activist. She was along with With her siblings, Owens was raised in Stamford, Connecticut, by her grandparents from around the age of 11 or 12, after her parents divorced. She was the third of four children. She said her paternal grandfather Robert Owens, a Black American, was born in North Carolina. Owens is also of Carib.
Review 3 to 4 stories on both the Media Matters (httpmediamatte.docxzmark3
Review 3 to 4 stories on both the Media Matters (
http://mediamatters.org
) and Newsbusters (
newsbusters.org
) websites. What stories did you review? Do the stories noted by each of the organizations as evidence of liberal or conservative bias in the media truly support this argument? Might some individuals argue that the stories noted as evidence of either liberal or conservative bias are actually factual rather than biased? To what extent do you feel media bias is based on each individual’s own ideological position?
.
Review 1 Sustainable graphic designAs society continues to de.docxzmark3
Review 1: Sustainable graphic design
As society continues to develop, human beings have become more aware of the need to protect the environment. Today graphic designer’s obligation no longer limited in providing design service to our clients. But as a citizen in our society, contemporary designers should consume their career in a sustainable way, which include encouraging their colleagues and clients to follow the same eco-friendly practice.[1] Because without of the Earth’s ecosystems human life would be threatened. Human being is heavily reliant on the essential ecological elements like water and air.
Today, practicing sustainability does not simply mean recycling newspaper and water bottle. Because there is energy input and cost in each step of manufacturing, consuming the product and recycling. The principle of sustainable design has changed from reducing waste and choosing recyclable materials to consider each step in Life Cycle Assessment(LCA). In the book Sustainable Design: A Critical Guide, David Bergman states the concept of sustainability has shifted from its 1960s origins, which mainly emphasized in the phrase “Reduce, reuse, recycle.” Bergaman believes it oversimplified the sustainability we facing.[2] To achieve the goal of design for sustainability, graphic design could consider and utilize LCA to examine their product and each manufacturing process from beginning to end of life phase. A qualified sustainable design must be well-designed to reduce waste and unnecessary cost in each step of LCA, which are raw material extraction, material processing, part manufacturing, assembly, product use and end of life.[3]
The package design for Cereal Revolution by Modern Species is a good example of how contemporary company conducts sustainability through a piece of thoughtful design. In 2012, cereal company issued a line of health, low-calorie cereal called Cereal Revolution. To pair up with the health-friendly goal, design studio Modern Species create a series of cereal package that is eco-friendly. The size of boxes are designed to minimize the shipping cost and storage space, folded in a way that reduces the need for glue, and was printed on 100% recycled paperboard with soy-based inks. The bag inside the box is home compostable cellophane, which can are fully biodegradable.
The thoughtful package of Cereal Revolution showcases enforce sustainability by choosing 100% recyclable martial, eco-friendly soy-based ink, reduce assemble cots and lower the transportation cost. Using recycled materials not only minimized the cost of manufacturing materials but also could benefit the disposal process after the package was consumed. Folding the box in a way that is required less glue to reduce the pollution caused by the assemble process, and choosing this particular size could save energy and space in transportation and storage.
The package design of Cereal Revolution is a successful sustainable graphic design because the designer has .
Reverse Interpreting Lab Results Table 87.2A possible reason why.docxzmark3
Reverse Interpreting Lab Results Table 87.2
A possible reason why the glucose and hemoglobin A1C levels are elevated is because
the pancreas is not producing enough insulin to breakdown glucose. Because the pancreas is not
effectively breaking down enough glucose, the excess glucose in the bloodstream causes nerve
damage especially to the kidneys, where the blood is filtered. The lack of proper blood filtration
because of kidney damage is the reason for the decreased levels of RBCs, platelets, hemoglobin,
platelets, and hematocrit levels. This also is the reason for increased mchc, mcv, and INR values.
Hdl levels are also decreased because of the cardiovascular issues associated with damage to the
blood vessels from continuous high blood sugar. The reason for the decreased level of white
blood cells would most likely be because the body is fighting a disease process most likely
caused by uncontrolled elevated blood sugar levels for an extended period of time.
Since most of the abnormal levels in this table are concurrent with abnormal values
associated with type 2 diabetes that is not well controlled, a good scenario would be that the
patient with these lab values has type 2 diabetes. The patient most likely does not control their
blood sugar well and has most likely had issues with maintaining a decreased blood sugar for an
extended period of time. The nurse would expect the patient to have a diet consisting of high
sugars and carbohydrates. The nurse would also expect the patient to have really white gums,
fatigue, lethargy, no energy, headaches, excessive thirst and hunger, and increased urine output.
Works Cited
Gauci, R., Hunter, M., Bruce, D. G., Davis, W. A., & Davis, T. M. E. (2017). Anemia
complicating type 2 diabetes: Prevalence, risk factors and prognosis. Journal of Diabetes
and Its Complications, 31(7), 1169–1174. https://doi-
org.ezproxy.hsutx.edu:4443/10.1016/j.jdiacomp.2017.04.002
Jin Ook Chung, Seon-Young Park, Dong Hyeok Cho, Dong Jin Chung, Min Young Chung,
Chung, J. O., ... Chung, M. Y. (2017). Anemia, bilirubin, and cardiovascular autonomic
neuropathy in patients with type 2 diabetes. Medicine, 96(15), 1–4. https://doi-
org.ezproxy.hsutx.edu:4443/10.1097/MD.0000000000006586
Reverse interpreting results
For this assignment I chose table 87.2. The table shows that the patient has a high blood
glucose and HbA1c. A high blood sugar result is caused by eating too much sugar and
carbohydrates or because of diabetes mellitus. According to Huether (2017), in a person with
diabetes their pancreas does not produce enough insulin to break down the glucose, so the excess
ends up in the blood stream (p. 473). She also states that high HbA1c levels are caused by poor
control of one’s blood sugar. The excess blood sugar in the blood stream causes damage to the
kidneys which in result can lead to anemia. WebMD suggests that anemia can result from kidney
damage because the kidneys do not send out enough erythropoietin. Anemia can result.
Results DisplayedFeedback· Question 10 out of 2 points.docxzmark3
Results Displayed
Feedback
· Question 1
0 out of 2 points
The chi-square statistic is often used in behavioral data to test for relationships between variables. This procedure is based on the null hypothesis of no association or independence. Which of the following statements is incorrect regarding this analytic technique?
· Question 2
2 out of 2 points
Multiple logistic regression analysis applies when there is a single dichotomous outcome and more than one independent variable.
· Question 3
2 out of 2 points
For a two-tailed test using z values at the 5% significance level we reject H0:
· Question 4
0 out of 2 points
Which of the following measures is least affected by extreme or outlying values in a dataset?
· Question 5
0 out of 2 points
What is the first summary statistic for a continuous variable?
· Question 6
0 out of 2 points
The following are HDL levels measured in healthy females.
60 63 60 58 60 70 54 72 80 75 78 77
Calculate the range
· Question 7
2 out of 2 points
What is the median blood glucose level of the following data set collected from 8 individuals: 89, 95, 99, 102, 107, 108, 111, and 119?
· Question 8
0 out of 2 points
Which of the following types of bias is most commonly associated with a case-control study?
· Question 9
0 out of 2 points
A study is designed to evaluate the impact of a daily multivitamin on students’ academic performance. One hundred sixty students are randomly assigned to receive either the multivitamin or a placebo and are instructed to take the assigned drug daily for 20 days. On day 20, each student takes a standardized exam and the mean exam scores are compared between groups. This study is an example of a
· Question 10
0 out of 2 points
Which of the following is true about a positively skewed distribution of data?
· Question 11
0 out of 2 points
Which of the following types of mutation describes a point mutation?
· Question 12
2 out of 2 points
“Agent Orange” was used in Vietnam by the U.S. military as a:
· Question 13
2 out of 2 points
Health consequences of secondhand tobacco smoke have been persistently observed. There is biological plausibility of exposure to secondhand smoke causing adverse neurodevelopmental effects in children whose parents smoke. Which of the following statements is (are) accurate concerning the health effects of secondhand smoke?
· Question 14
2 out of 2 points
The first large-scale use of DDT occurred in Italy in 1943 when the insecticide was used for dusting refugees in a successful attempt to prevent an outbreak of a deadly disease spread by body lice which frequently occurs under wartime conditions of overcrowding and poor sanitation. What disease did DDT prevent in this situation?
· Question 15
2 out of 2 points
About ranges .
Rev. 8.18 GUIDELINES FOR ORGANIZATIONAL ANALYSIS ASSIGNMEN.docxzmark3
Rev. 8.18
GUIDELINES FOR ORGANIZATIONAL ANALYSIS ASSIGNMENT
Using Collins’ work as a model and framework for advanced organizational analysis (and other
references as needed), analyze a system, organization, organization systems and/or subsystems.
Consider each of the concepts proposed by Collins’ breaking down the organizations’ strategic plan,
financial management, organizational structure, leadership, organizational culture, performance
outcomes, etc. Collins’ work is a good foundational text, along with Fifth Discipline (Senge, 1990)
and other related writers and models.
When analyzing an organizational system, along with Collins’ work, consider chaos theory and
complexity science (Wheatley, Porter-O-Grady), learning organizations (Senge), change and
innovation (Gladwell, Rogers, Quinn). If you have not found these references in the required or
recommended course readings, google the names of these authors and learn more about their
contributions to understanding organizational behavior and leading complex systems. Such
references may be useful in arriving at a greater level of understanding of organizations necessary to
truly transform our current health care systems. As part of this analysis, consider interviewing
members of the staff, board members, organizational historians, key administrative personnel (CFO,
CEO, CNE, etc.). If you are not familiar with the organization/system, it will be essential that you
talk to members of the organization who can help you develop a rich understanding of the
leadership, culture, and decision-making patterns. Consider what is written about the organization
and its system in the local paper, regional documents, trade journals, etc. These qualitative methods,
along with review of clinical, financial and other evaluation measures (quantitative measures), will
provide a more holistic perspective of an organizational systems’ performance.
The paper should be carefully written in a formal style, based on primary sources, provide an
integration of ideas, and be 5-6 pages in length, excluding title page & reference list. Organized
flow, logical progression of ideas, and clarity in thought are essential. Please use headings to
separate content. References must be timely; published within the previous five (5) years. Liberal
number of primary and peer reviewed references (minimum of 10).
Deductions:
Papers over the page limit will be penalized by a disregard of content over the page limit.
Scholarship Expectations:
A lack of Scholarship deduction of up to 20% of the total point value of the assignment will be
applied to address such deficiencies as APA errors, Title or Reference page errors, a lack of
clarity and conciseness in writing, grammatical and spelling errors, exceeding the prescribed
page limit, and poor overall writing skills. For example, an assignment worth 15 points could
have a maximum lack of scholarship deduction of 3 points (20% x 15). The amount of.
Revenue recognition
Academic Resource Center
Revenue recognition Page 2
General
► This new guidance will supersede almost all existing revenue guidance under US
GAAP (including industry guides) and IFRS.
► The AICPA has formed various industry task forces to help develop non-authoritative
guidance.
► The FASB and IASB announced the formation of a joint transition resource group
(TRG) that will be responsible for informing the Boards about interpretive issues that
arise as companies implement the revenue standards. The TRG will not issue
guidance.
The FASB and IASB issued new guidance on accounting for revenue
recognition, Revenue Recognition – Revenue from Contracts with
Customers.
► FASB – ASC 606 (ASU 2014-09)
► IASB – IFRS 15
May 2014
Academic Resource Center
Revenue recognition Page 3
General
► ASC 606 applies to both public and non-public entities. For non-public entities, there is
some specific relief related to disclosures, transition and the effective date.
► At the December 5, 2016 AICPA National Conference on Current SEC and PCAOB
Developments, Sylvia E. Alicea, a professional accounting fellow of the office of the chief
accountant (OCA) made the following comments:
“SAB Topic 13 will continue to apply to registrants prior to their adoption of the new
revenue standard so it will continue to be relevant until all registrants have completed their
transition. New guidance will be provided, as needed. However, when OCA evaluates
implementation-related consultations under U.S. GAAP, our starting point is the new
revenue standard (and any subsequent amendments) as issued by the FASB. Therefore, I
believe registrants should also apply that model (as opposed to SAB Topic 13) when
evaluating their revenue arrangements for adoption of Topic 606.”
► IFRS 15 does not specifically apply to non-public entities. These non-public entities may
apply IFRS for Small and Medium-Sized Entities.
Academic Resource Center
Revenue recognition Page 4
Effective date and adoption methods
US GAAP
► For US public entities, certain not-for-profit entities and
certain employee benefit plans, the guidance is effective
for annual periods beginning after December 15, 2017.
Early adoption is permitted for annual periods beginning
after December 15, 2016.
► All other US entities are required to apply the standard to
annual periods beginning after December 15, 2018 but
can also early adopt beginning after December 15, 2016.
IFRS
► The guidance is effective for annual
periods beginning on or after
January 1, 2018.
► Early adoption is permitted. Early
adoption was permitted when IFRS
15 was originally issued.
The adoption methods available for both US GAAP and IFRS include the full retrospective approach
and the modified retrospective approach. These are further explained on the following slide.
Academic Resource Center
Revenue recognition Page 5
Effective date and adoption methods
Key .
ReturnsA return, also known as a financial return is the money m.docxzmark3
Returns
A return, also known as a financial return is the money made or lost on an investment. A return can be expressed nominally as the change in dollar value of an investment over time or as a percentage derived from the ratio of profit to investment. We will cover those ratios below. If we make a profit on our investment or venture, we have a positive return. If we lose money on our investment or venture, we have negative return.
A nominal return is the net profit or loss of an investment expressed in nominal terms (i.e., levels). It can be calculated by figuring the change in value of the investment over a stated time period plus any distributions minus any outlays. Distributions received by an investor depend on the type of investment or venture but may include dividends, interest, rents, rights, benefits, or other cash flows received by an investor. Outlays paid by an investor depend on the type of investment or venture but may include taxes, costs, fees, or expenditures paid by an investor to acquire, maintain, and sell an investment. For example, assume an investor buys $2,000 worth of publicly traded stock, receives no distributions, pays no outlays, and sells the stock two years later for $2,200. The nominal return in dollars is $2,200 - $2,000 = $200.
A percentage return is a return expressed as a percentage. It is known as the return on investment (ROI). ROI is the return per dollar invested and is calculated by dividing the dollar return by the dollar initial investment. This ratio is multiplied by 100 to get a percentage. Assuming a $200 return on a $1,000 investment, the percentage return or ROI = ($200 / $1,000) × 100 = 20 percent.
A holding period return is an investment's return over the time it is owned by a particular investor. Holding period return may be expressed nominally or as a percentage.
Rate of return is the proportion of profit earned from an investment during a periodic interval of time, expressed as a percentage. For example, the return earned during the periodic interval of a month is a monthly return and of a return earned during a year is an annual return.
Returns over periodic internals of different lengths can only be compared when they have been converted to same length intervals. It is customary to compare returns earned during yearlong intervals. Return of capital refers to the recovery of the original investment.
Return Ratios
Companies use different kinds of return ratios to compare one investment option to another one:
· Return on equity (ROE) is a profitability ratio figured as net income divided by average shareholder's equity, which measures how much net income is generated per dollar of stock investment. If a company makes $10,000 in net income for the year and the average equity capital of the company over the same time period is $100,000, the ROE is 10 percent.
· Return on assets (ROA) is a profitability ratio figured as net income divided by average total assets, which measures how much net p.
Retirement usually results in leaving a major life structure—one.docxzmark3
Retirement usually results in leaving a major life structure—one that provided social status, focus, purpose, and economic resources. The potential loss of daily stimulation poses threats to both cognitive and social functioning. Because so much of one’s social status is linked to occupational attainment, leaving a work role is almost like giving up a social identity" (Newman & Newman, 2018).
Given the information and evidence you have read about later adulthood, what are your thoughts about retirement?
Is age a relevant factor in deciding when to retire? If not, what other factors should a person consider?
Describe an approach to retirement that inspires you.
What is your own plan regarding retirement? Do you expect to retire? How does work fit into your sense of life satisfaction? How important is work to your personal identity?
.
RethinkingtheWesternTraditionThe volumes in th.docxzmark3
Rethinking
the
Western
Tradition
The volumes in this series
seek to address the present debate
over the Western tradition
by reprinting key works of
that tradition along with essays
that evaluate each text from
di!erent perspectives.
EDITORIAL
COMMITTEE FOR
Rethinking
the
Western
Tradition
David Bromwich
Yale University
Gerald Graff
University of Illinois at Chicago
Geoffrey Hartman
Yale University
Samuel Lipman
(deceased)
The New Criterion
Gary Saul Morson
Northwestern University
Jaroslav Pelikan
Yale University
Marjorie Perloff
Stanford University
Richard Rorty
Stanford University
Alan Ryan
New College, Oxford
Ian Shapiro
Yale University
Frank M. Turner
Yale University
Allen W. Wood
Stanford University
The Social
Contract and
The First and
Second
Discourses
J E A N - J A C Q U E S R O U S S E A U
Edited and with an Introduction by Susan Dunn
with essays by
Gita May
Robert N. Bellah
David Bromwich
Conor Cruise O’Brien
Yale University Press
New Haven and London
Copyright ! 2002 by Yale University.
Translations of The Discourse on the Sciences and Arts and
The Social Contract copyright ! 2002 by Susan Dunn.
All rights reserved.
This book may not be reproduced, in whole or in part,
including illustrations, in any form (beyond that
copying permitted by Sections 107 and 108 of the U.S.
Copyright Law and except by reviewers for the public
press), without written permission from the publishers.
Printed in the United States of America by Vail-Ballou Press, Binghamton, New York.
Library of Congress Cataloging-in-Publication Data
Rousseau, Jean-Jacques, 1712–1778.
[Selections. English. 2002]
The social contract ; and, The first and second discourses / Jean-Jacques Rousseau ;
edited and with an introduction by Susan Dunn ; with essays by Gita May . . . [et al.].
p. cm. — (Rethinking the Western tradition)
Includes bibliographical references.
isbn 0-300-09140-0 (cloth : alk. paper) — isbn 0-300-09141-9 (pbk. : alk. paper)
1. Political science—Early works to 1800. 2. Social contract—Early works to 1800.
3. Civilization—Early works to 1800. I. Dunn, Susan. II. May, Gita. III. Title. IV. Series.
jc179 .r7 2002
320%.01—dc21 2001046557
A catalogue record for this book is available from the British Library.
The paper in this book meets the guidelines
for permanence and durability of the Committee on
Production Guidelines for Book Longevity of the
Council on Library Resources.
10 9 8 7 6 5 4 3 2 1
Contributors
Robert N. Bellah is Elliott Professor of Sociology Emeritus at the Univer-
sity of California at Berkeley. He is the author of numerous books, includ-
ing Beyond Belief and The Broken Covenant, and is co-author of Habits of
the Heart and The Good Society.
David Bromwich is Housum Professor of English at Yale University. He is
the author of several books, including Politics by Other Means: Higher
Education and Group Thinking, Skeptical Music: Essays on Modern Po-
etry, and A.
Restraining Overconfident CEOs through
Improved Governance: Evidence from the
Sarbanes-Oxley Act
Suman Banerjee
College of Business, University of Wyoming
Mark Humphery-Jenner
UNSW Business School, UNSW Australia
Vikram Nanda
Rutgers University and University of Texas at Dallas
The literature posits that some CEO overconfidence benefits shareholders, though high
levels may not. We argue that adequate controls and independent viewpoints provided by
an independent board mitigates the costs of CEO overconfidence. We use the concurrent
passage of the Sarbanes-Oxley Act and changes to the NYSE/NASDAQ listing rules
(collectively, SOX) as natural experiments, to examine whether board independence
improves decision making by overconfident CEOs. The results are strongly supportive:
after SOX, overconfident CEOs reduce investment and risk exposure, increase dividends,
improve postacquisition performance, and have better operating performance and market
value. Importantly, these changes are absent for overconfident-CEO firms that were
compliant prior to SOX. (JEL G23, G32, G34)
Overconfidence can lead managers to overestimate returns and underestimate
risk. The literature suggests that even though some CEO overconfidence
We acknowledge the thoughtful comments of David Hirshleifer (the editor) and two anonymous reviewers.
We thank the seminar participants at University of Calgary, Fudan University, IIMC Kolkota, Kobe University,
Massey University, Nanyang Technological University, National University of Singapore, Peking University
HSBC School of Business, UNSW School of Business, University of Technology Sydney, the J.P. Morgan ESG
Quantferance (2013), American Finance Association Meeting (2015), American Law and Economics Association
Annual Meeting (2014), Asian Bureau of Finance and Economic Research Conference (2014), Australasian
Finance and Banking Conference (2013), Conference on Empirical Legal Studies (2014), Conference on
Global Financial Stability (2013), Financial Management Association Annual meeting (2013), and the Paul
Woolley Conference on Capital Market Dysfunctionality (2014). The paper also benefited from comments
from Itzhak Ben-David, Gennaro Bernille, Oleg Chuprinin, Wai Mun Fong, Jarrad Harford, Gerard Hoberg,
Russell Jame, Jon Karpoff, Asad Kausar, Andy Kim, Jaehoon Lee, Angie Low, Kasper Nielsen, Thomas Noe,
Terrence Odean, Nagpurnanand Prabhala, David Reeb, Anand Srinivasan, Geoffrey Tate, Stephen Taylor, Robert
Tumarkin, John Wald, and Emma Zhang. Suman Banerjee gratefully acknowledges the SUG Tier 1 research
grant from the Ministry of Education, Singapore. Mark Humphery-Jenner acknowledges the support of the ARC
DECRA grant# DE150100895. Supplementary data can be found on The Review of Financial Studies web site.
Send correspondence to Vikram Nanda, Naveen Jindal School of Management, University of Texas at Dallas,
Richardson, TX 75080 & Rutgers University, Rockafeller Road, New Brunswick, NJ 08854; telephone: (404)
769-.
Restorative Justice
Supporting Lectures:
Social Process
Positive Criminology
Punishment
A recent movement in criminology has been the development of “restorative justice.” Some restorative justice programs seek to find alternative forms of punishment, with the goal of better serving the needs of the victim, offender, and community. Often, punishments involving shame or stigma are utilized instead of incarceration.
Prepare a PowerPoint presentation of 8-10 slides that will cover the points listed below. Make use of the “notes” areas to elaborate on the brief points presented on the slide.
How effective are policies of shaming and placing stigmas on individuals in deterring crimes?
Critically evaluate the process of restorative justice, and identify barriers to successful implementation. What factors might hinder a restorative justice effort?
Have any restorative justice models proven to be effective in the United States? Provide an example of a program and analyze its effectiveness.
Relate the idea of restorative justice to the impact of attachments, such as to school and social activities.
How can the lessons learned in this assignment be used to improve existing policies?
Name your PowerPoint presentation SU_MCJ6003_W4_A2_LastName_FirstInitial.ppt. Submit your presentation to the
Submissions Area
by the
due date assigned. Cite sources in APA format on a separate slide.
Week 4 Project
Due April 19 at 11:59 PM
.
Rethinking the Social Responsibility of BusinessA Reason debate fe.docxzmark3
Rethinking the Social Responsibility of Business
A Reason debate featuring Milton Friedman, Whole Foods' John Mackey, and Cypress Semiconductor's T.J. Rodgers.
October 2005 Print Edition Reason Magazine
Thirty-five years ago, Milton Friedman wrote a famous article for The New York Times Magazine whose title aptly summed up its main point: "The Social Responsibility of Business Is to Increase Its Profits." The future Nobel laureate in economics had no patience for capitalists who claimed that "business is not concerned 'merely' with profit but also with promoting desirable 'social' ends; that business has a 'social conscience' and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers."
Friedman, now a senior research fellow at the Hoover Institution and the Paul Snowden Russell Distinguished Service Professor Emeritus of Economics at the University of Chicago, wrote that such people are "preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades."
John Mackey, the founder and CEO of Whole Foods, is one businessman who disagrees with Friedman. A self-described ardent libertarian whose conversation is peppered with references to Ludwig von Mises and Abraham Maslow, Austrian economics and astrology, Mackey believes Friedman's view is too narrow a description of his and many other businesses' activities. As important, he argues that Friedman's take woefully undersells the humanitarian dimension of capitalism.
In the debate that follows, Mackey lays out his personal vision of the social responsibility of business. Friedman responds, as does T.J. Rodgers, the founder and CEO of Cypress Semiconductor and the chief spokesman of what might be called the tough love school of laissez faire. Dubbed "one of America's toughest bosses" by Fortune, Rodgers argues that corporations add far more to society by maximizing "long-term shareholder value" than they do by donating time and money to charity.
Reason offers this exchange as the starting point of a discussion that should be intensely important to all devotees of free minds and free markets. Comments should be sent to [email protected]
Putting Customers Ahead of Investors
John Mackey
In 1970 Milton Friedman wrote that "there is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." That's the orthodox view among free market economists: that the only social responsibility a law-abiding business has is to maximize profits for the shareholders.
I strongly disagree. I'm a businessman and a free market libertarian, but I believe that the .
RestructuringImagine that you are the liaison between the decisi.docxzmark3
Restructuring
Imagine that you are the liaison between the decision makers and the followers and that your role is to communicate potential personnel change initiatives. Using the communication strategies found in the text, what actions will you take to format the conversation with employees regarding the restructuring process?
.
Restructuring Debt DataYour company is in financial trouble an.docxzmark3
Restructuring Debt Data
Your company is in financial trouble and is in the process of reorganizing. Your manager wants to know how you will report on restructuring the debt. Use the following information to help with this assignment.
• Part A
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 108,340
Trade accounts receivable, net of allowances 2,866,260
Other receivables 62,150
Operating supplies, at lower of average
cost or market 58,630
Prepaid expenses 446,050
Total Current Assets 3,541,430
PROPERTY, PLANT, AND EQUIPMENT (at cost)
Land 1,950,000
Buildings and improvements 2,327,410
Equipment 5,015,660
Other equipment and leasehold improvements 1,645,580
total 10,938,650
Accumulated depreciation and amortization (7,644,430)
Net Property, Plant, and Equipment 3,294,220
OTHER ASSETS
Deposits and other assets 1,000,080
TOTAL ASSETS $ 7,835,730
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 972,160
Accrued liabilities 2,071,270
Accrued claims costs 793,620
Federal and other income taxes 19,710
Deferred income taxes 500
Current maturities of long-term debt and
capital lease obligations 50,610
Short-term borrowings 249,250
Total Current Liabilities 4,157,120
LONG-TERM LIABILITIES
Capital lease obligation 54,580
Note outstanding 3,000,000
Mortgage outstanding 608,030
Other liabilities 95,860
Total long-term liabilities 3,758,470
Total Liabilities 7,915,590
SHAREHOLDERS’ EQUITY (DEFICIT)
Common stock, $.01 par value; authorized
500,000 shares; issued 231,000 shares 2,310
Additional paid-in capital 731,090
Accumulated other comprehensive loss (113,500)
Retained earnings (deficit) (639,180)
Treasury stock (60,580)
Total Shareholders’ Equity (Deficit) (79,860)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 7,835,730
• Part B
As stipulated, your company is having financial difficulty and has asked the bank to restructure its $3 million note outstanding. The present note has 3 years remaining and pays a current interest rate of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face va.
Rethinking security:
A discussion paper
The Ammerdown Group
May 2016
EXECUTIVE SUMMARY
The Ammerdown Group brings together practitioners and academics in search of a new
vision for the future of our common peace and security. The group includes participants
from Conciliation Resources, Campaign Against Arms Trade, International Alert, Joseph
Rowntree Charitable Trust, Oxford Research Group, Quaker Peace and Social Witness,
Saferworld, and Three Faiths Forum, as well as independent practitioners, and academics
from the universities of Bradford, Coventry, Kent, Leeds Beckett and Oxford Brookes.
The Ammerdown Group takes its name from the Ammerdown Centre, a retreat and
conference centre in Somerset, where the group meets together. The views expressed
in this document do not necessarily represent those of the Ammerdown Centre’s staff or
trustees, but the Ammerdown Centre fully supports the work of the Ammerdown Group
as part of its charitable commitment to promoting justice, peace and reconciliation and
to facilitating free and open discussion on these issues.
The Ammerdown Group has produced this publication to stimulate debate about the
UK’s approach to security. The group welcomes feedback on the paper and is interested
in working with others to promote further discussion about the security challenges of
the 21st century. For more information, visit rethinkingsecurity.org.uk
The Ammerdown Group, 2016.
This report may be distributed freely for non-commercial purposes. Please cite as:
Ammerdown Group. (2016). Rethinking Security: A discussion paper.
This work is licensed under the Creative Commons Attribution-NonCommercial 4.0
International Licence. To view a copy of the licence, visit:
http://creativecommons.org/licenses/by-nc/4.0.
1
EXECUTIVE SUMMARY
The Ammerdown Group brings together peacebuilding practitioners and academics concerned about the effects of geopolitics
on the security of people worldwide. The group is seeking a public conversation in search of a new vision for peace and
security. This paper is one contribution. It explores the security strategies of Western states, particularly the UK, and
proposes principles for a more effective approach in the common interest. We welcome responses from all quarters.
To download the complete paper with references please visit rethinkingsecurity.org.uk
A failing response to growing insecurity
People across the world face growing insecurity. Violent conflict is spreading and intensifying,
economic inequality is widening, and the natural ecology on which human life depends is in jeopardy.
The world’s poorest people bear the brunt, while those in rich countries are also increasingly affected.
The preferred responses of Western states are manifestly not working and have often made matters
worse. The UK’s primary response has been to ‘project power’, joining the US and other Western
states in a series of military intervention.
Responsibilities after divorceDo you ever wonder what kind of.docxzmark3
Responsibilities after divorce
Do you ever wonder what kind of Responsibilities couples have to go thru after they go from their divorce? Within my case #8 Responsibilities after divorce Elmer and Doris where married, Elmer had donated a pint of blood that Doris needed during an operation, several years after they had gotten divorced Elmer had an accident and he needed a pint of blood Doris was the only one with the same blood type.
In my opinion, I believe Doris should to the right thing and donate the blood to Elmer. According to the synopsis, there is no moral reason for Doris not to donate because she was a match and had good health. As I grew up, I learned that you should always help people even if you are upset with them or do not talk to them as much as friends. I was also raised to believe that we are all morally obligated to help each other as friends and family in their times of needs. I believe Doris is morally obligated to donate but legally she is not obligated
Doris had no legal obligation to donate the pint of blood for Elmer unless there was a legal clause in their divorce decree. In addition, in this case #8 Elmer current wife was not a match to Elmer’s blood type so Cora could not legally donate because they are not a match.
Doris was the only one Elmer was able to reach at this time and the only one with the match and she was faced with the dilemma on donating blood for Elmer. Everyday people are forced to dill with ethical dilemmas and conflicts. I believe it is our morals and values that guide us on how to deal with them and help us with the choices that we make during our lifetime.
In conclusion, I Believe life teaches us on to treat others, as we want to be treated. I would not want anyone who had the same blood type as I do and say they do not want to for a reason I will feel bad for someone to say that I would help that person if I had that same blood type or any other donation they need.
.
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This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Normal Labour/ Stages of Labour/ Mechanism of LabourWasim Ak
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Biological screening of herbal drugs: Introduction and Need for
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Natural Products, In vitro evaluation techniques for Antioxidants, Antimicrobial and Anticancer drugs. In vivo evaluation techniques
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A Strategic Approach: GenAI in EducationPeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Rethinking The Current Inflation Target Range In South Afric.docx
1. Rethinking The Current Inflation Target Range In South
Africa
Lumengo Bonga-Bonga, Ntsakeseni Letitia Lebese
The Journal of Developing Areas, Volume 53, Number 2, Spring
2019, pp.
13-27 (Article)
Published by Tennessee State University College of Business
DOI:
For additional information about this article
Access provided by Ebsco Publishing (11 Sep 2018 13:19 GMT)
https://doi.org/10.1353/jda.2019.0018
https://muse.jhu.edu/article/702993
https://doi.org/10.1353/jda.2019.0018
https://muse.jhu.edu/article/702993
T h e J o u r n a l o f D e v e l o p i n g A r e a s
Volume 53 No. 2 Spring
2019
RETHINKING THE CURRENT INFLATION
TARGET RANGE IN SOUTH AFRICA
2. Lumengo Bonga-Bonga
Ntsakeseni Letitia Lebese
University of Johannesburg, South Africa
ABSTRACT
Critics argue that inflation targeting is not an appropriate
monetary policy framework for
developing countries. They maintain that developing countries
are more susceptible to the negative
effects of external shocks due to the uncertainty perceived by
investors with respect to their
political and economic stability. It is in this line that this paper
assesses whether the 3%-6%
inflation target is the optimal inflation target band in South
Africa. To determine the optimal level
of inflation target in South Africa, this paper follows the
methodology developed by Ball and
Mankiw (2002), which rests on the premise that there is a short
run trade-off between inflation and
unemployment. Ball and Mankiw (2002) show that there exists a
level of unemployment that is
consistent with stable inflation. The unemployment level that
3. corresponds with a stable inflation is
known as the non-accelerating inflation rate of unemployment
(NAIRU). Thus, this paper uses an
expectations-augmented Phillips curve to estimate a time-
varying NAIRU for South Africa from
1980 to 2015. We use the headline inflation rate and the official
unemployment rate based on the
narrow definition to evaluate the appropriateness of the current
inflation target range. Quarterly
data from 1980 to 2015 sourced from Quantec is used to this
end. The results of the empirical
analysis indicate that, if South Africa were to put in place an
inflation target range based on the
NAIRU, it would have to target an inflation rate that ranges
from 1.4 to 11.5 percent. This range is
different to the official inflation target of 3% to 6% adopted by
the South African Reserve Bank
(SARB). Furthermore, this paper finds that the Phillips curve is
not vertical in South Africa, as
actual inflation does not depend solely on inflation
expectations. The policy implication of the
findings of this paper is that the South African Reserve Bank
should think about revising its current
inflation target, as it is too narrow for an emerging economy.
4. The current low range of inflation
target could have a negative effect on output and unemployment
in the country. This paper
recommends that the SARB should rely on the realities of the
South African economy rather than
on external concerns when defining the range of inflation target.
JEL Classifications: E52, C13
Keywords: inflation target, NAIRU, unemployment, South
Africa
Corresponding Authors’ Email Addresses: [email protected]
INTRODUCTION
South Africa had double-digit inflation rates from the 1970s to
the early 1990s
(Casteleijn 1999; Rossouw & Padayachee, 2008). In 1994,
following its re-integration
into the international economy, South Africa was subjected to
increased political pressure
to reduce its inflation rate to levels which were commensurate
with its trading partners
(Banerjee, Galioni, Levinsohn, McLaren & Woolard 2008; van
der Merwe 2004;
Padayachee, 2001; Ricci, 2005). Subsequently, the government
5. introduced inflation
targeting as a monetary policy framework in 2000 (Mboweni
1999) Inflation targeting
policy aimed at stabilising prices in South Africa. A number of
studies support the view
14
that the pursuit of price stability has been successful in
reducing the high inflation rate in
South Africa (National Labour and Economic Development
Institute, 2004 Ricci, 2005).
South Africa managed to achieve single digit inflation rates in
the mid-1990s for the first
time since the 1960s, (Casteleijn, 1999). However, while the
South African Reserve Bank
(SARB) succeeded in reducing inflation, the government failed
to realise the
development objectives as set out in GEAR (National Labour
and Economic
Development Institute, 2004). South Africa experienced a
continued increase in the
unemployment rate from 1980 to 2010, reaching 27% in 2003
(Department of Economic
6. Development, 2010). In 2010, South Africa was ranked amongst
the top 10 countries in
the world that have high unemployment rates (Department of
Economic Development,
2010). According to McCord and Bhorat (2003), South Africa
has the highest
unemployment rates compared to other emerging countries in
Africa, Asia and Latin
America. The rising unemployment may be attributed to the
change in monetary policy as
international empirical evidence (Akerlof, Dickens, Perry,
Gordon & Mankiw 1996;
Fortin, 2001; Lundborg & Sacklẻn, 2006) indicates that a
change in the inflation rate
from a high level to a low level is associated with perpetual
increases in the
unemployment rate. Some experts reinforce this observation by
noting that at low
inflation rates, the Phillips curve is negatively sloped, implying
a trade-off between
inflation and unemployment (Akerlof et al., 1996; Holden,
2002; Lundborg and Sacklẻn,
2006; Padayachee, 2001). The existence of trade-off means that
reductions in the
7. inflation rate are directly correlated with increases in the
unemployment rate (Erceg,
2002). Hence, it is essential for a central bank to establish the
correct shape of the Phillips
curve for that particular economy and the consequent dynamics
of the
inflation/unemployment trade-off before deciding, on the one
hand, on the suitable
monetary policy regime to pursue or, on the other, if inflation
targeting is the choice, on
the targeted band.
Critics argue that inflation targeting is not an appropriate
monetary policy
framework for developing countries (Kahn, 2008). They
maintain that developing
countries are more susceptible to the negative effects of
external shocks due to the
uncertainty perceived by investors with respect to their political
and economic stability
(Ricci, 2005). Investor uncertainty and the requirement of a
flexible foreign exchange
market expose small developing economies to negative external
shocks more than it does
8. big and developed economies (Kahn, 2008; Ricci, 2005). In
addition, some scholars
argue that if the central bank makes the pursuit of price
stabilisation its sole objective,
economic growth and development are inhibited (Kahn, 2008).
However, recent studies
(Arkerlof, Dickens, Perry, Bewley and Blinder, 2000; Ball and
Mankiw, 2002; Fortin,
2001; Lundborg and Sacklẻn, 2006; Hsing, 2009; Fortin, 2001),
on the relationship
between inflation and unemployment indicate that there is a
particular point on a non-
linear Phillips curve where the trade-off is optimised and
central banks should set the
target for inflation at this specific point. Since a number of
authors suggest that inflation
targeting derives its justification from the theory of natural rate
(Bernanke, et al., 1999;
Bernanke, 2003), it is clear that the optimal target for inflation
rate should be set by
taking into account the level of natural rate of unemployment,
which determines the
shape of the Phillips curve. However, the widespread
implementation of low-inflation
9. targets assumes, without proper verification, the principle of a
vertical long-run Phillips
curve, whereby inflation has no long-run effect on
unemployment. This paper shows that
15
setting inflation targets simply by relying on the idea of vertical
Phillips curve may be
misleading if the actual shape of the Phillips curve is not
vertical.
Given the fact that unemployment has maintained a growing
trend in South
Africa even after the adoption of the inflation targeting policy,
the policy has become
very controversial (Department of Economic Development,
2010; Banerjee, Galioni,
Levinsohn, McLaren & Woolard, 2007; Klasen & Woolard,
2008), this paper aims to
evaluate whether the 3%-6% inflation target band is at a level
that optimised the trade-off
between inflation and unemployment. An optimal inflation ban
should refrain from
generating excess unemployment. The remainder of this paper is
10. organised as follows: In
Section 2, the literature is reviewed. This is followed by the
discussion of methodology in
Section 3. The estimation of results is detailed in section 4
while in section 5 we provide
the conclusion and policy implications of the research.
LITERATURE REVIEW
Theoretical Discussion
The debate on the relationship between inflation and
unemployment dates back to 1958
when Phillips (1958) found a nonlinear relationship between
unemployment and changes
in wages by conducting empirical tests on data from the United
Kingdom for the period
1861 to 1951. Based on the results of his study, Phillips
concluded that by accepting
some degree of inflation, central banks could maintain lower
rates of unemployment
(Van der Merwe, 2004). Phillips’ conclusion led to major
disagreements among
economists on the existence of a relationship between inflation
11. and unemployment and,
consequently, the actions that should be taken to address the
trade-off between these
economic indicators (Friedman, 1968; Burger and Marinkov,
2006; Fischer, 1996;
Mankiw, 2001).
Monetary economists argue that the Phillips curve is vertical in
the long run
(Friedman, 1968; Fischer, 1996; Michie, 2003). According this
group of economists, the
trade-off between inflation and unemployment is temporary and
mainly results from the
behaviour of workers as they adjust their wage expectations
following an increase in the
unemployment rate (Hodge, 2002; Friedman, 1968). In the long
run, following the full
incorporation of inflation expectations in wage negotiations;
there is an increase in the
inflation rate and the unemployment rate remains unchanged as
nominal wages adjust
towards their real rate (Hodge, 2002). The unemployment rate
thus returns to its natural
rate and hence, remains stable in the long run (Friedman,
1968:8 and Michie, 2003). A
12. vertical Phillips curve, as hypothesised by the monetarists,
implies that there is no
permanent relationship between inflation and unemployment.
Post-Keynesian economists
contest this tenet of monetary economists. They are of the view
that workers base their
wages on adaptive expectations; and that a trade-off between
inflation and unemployment
depends on how quickly workers adopt their future inflation
expectations following
disturbances in the economy and on the bargaining power of
employers during wage
negotiations (Holden, 2002; Michie, 2003; Hodge, 2002 and
Michie, 2003). The post-
Keynesian economists maintain that at any unemployment rate,
besides the natural rate of
unemployment, there will be a trade-off between inflation and
unemployment (Michie,
2003). The debate between the Keynesian, monetary and post-
Keynesian economists can
16
13. only be resolved by evaluating empirical evidence to conclude
whether or not there is a
relationship between inflation and unemployment or whether the
Phillips curve is vertical
or not. The empirical evidence is presented below.
INTERNATIONAL EMPIRICAL EVIDENCE
Existence of a Trade-Off
Empirical evidence supports the existence of a trade-off
between inflation and
unemployment. Research-conducted for European countries
(Holden, 2002); certain
member countries of the Organisation for Economic Corporation
and Development (Ball,
Mankiw & Nordhaus, 1999) as well as for the United States of
America (Karanassou,
Sala & Snower, 2010; Banarjee et al., 2008; Akerlof et al.,
2000)- demonstrates that there
is a trade-off between inflation and unemployment. The trade-
off results from, inter alia,
expectations about future inflation coupled with rigidities in
nominal wages (Akerlof et
14. al., 1996; Akerlof et al., 2000); regulated and highly unionised
labour markets (Holden,
2002) and shocks to economies (Svenssons, 1999). In their
study, Akerlof et al. (2000)
find that employees’ expectations deviate from rational
behaviour at low inflation levels
and that workers and employers tend to ignore the impact of low
inflation when they
negotiate wages and prices. Akerlof et al. (2000:4) use survey
data based on inflation
expectations of workers and employers to determine the
inflation rate and the
unemployment level, which optimises the trade-off between
inflation and unemployment.
In contrast to models based on rational expectations; Akerlof et
al. (2000) find that the
Phillips curve is not vertical at low inflation levels, and that
there is a trade-off between
inflation and unemployment.
In his study on European countries, Holden (2002) find that
countries with
regulated labour markets, and where the majority of workers are
unionised, face a trade-
off between inflation and unemployment when they target low
15. inflation rates. This
situation arises because, in unionised labour markets, wages can
only be changed through
mutual consent between employers and workers (Holden, 2002).
Hence, workers and
their labour unions possess bargaining power, which they can
use to prevent employers
from effecting cuts in nominal wages when inflation is low
(Holden, 2002) The inability
of employers to reduce nominal wages unilaterally means that,
in the long run, increases
in nominal wages lead to increases in inflation rate (Holden,
2002).
Determination of an Optimal Inflation Rate
The existence of a trade-off means that there is an optimal
inflation target. An appropriate
inflation target would ideally be close to the optimal inflation
rate on a nonlinear Phillips
curve. Given the presence of a trade-off, studies have been
conducted in certain
developed countries (Akerlof et al., 2000; Fortin, 2001;
Lundborg & Sacklen, 2006;
16. Maugeri, 2010; Wyplosz, 2000) to evaluate whether the
inflation target is set at a level
that optimises the trade-off between inflation and
unemployment. For example, Fortin
(2001:7) in his analysis of inflation in Canada over the period
1992 to 2002 find that the
inflation target, which is set by the Bank of Canada exhibits a
trade-off between inflation
17
and unemployment. While the Bank of Canada has set an
inflation rate band of 1%-3%,
Fortin (2001) find that an optimal inflation target band for
Canada would be 2%-3%.
In a study of inflation targeting policy in Sweden, Lundborg &
Sacklen (2006)
find that the inflation target of 2 percent, which is pursued by
the European Central Bank,
is not at a level that optimises the trade-off between inflation
and unemployment.
Lundborg & Sacklen (2006) analyse data from 1963 to 2000 and
find that the trade -off
would be optimised if the European Central Bank targeted an
17. inflation rate of 4 percent.
A similar study was conducted by Maugeri (2010) for Italy for
the period 1960to2003.
Maugeri (2010) finds that the inflation target of 2 percent,
which is pursued by the
European Central Bank, is not optimal for Italy. Maugeri notes
that the inflation rate that
would minimise the trade-off between inflation and
unemployment in Italy is between
15% and 20% (Maugeri, 2010). Making use of survey data on
inflation expectations of
economic agents in regulated and unionised labour markets of
France, Germany, the
Netherlands and Switzerland from 1960 to 1999, Wyplosz
(2000) investigates the
inflation rate that optimises the trade-off of the two variables in
these countries. Wyplosz
finds that the 2 percent inflation target, which is pursued by the
European Central Bank,
results in trade-off between inflation and unemployment, that is,
the low inflation target
leads to the increase in unemployment in these countries. The
results from Wyplosz’s
study (2000) suggest that an optimal inflation rate for France,
18. Germany, the Netherlands
and Switzerland should be 5 percent. While an optimal inflation
target range should
refrain from generating excess unemployment, Mishkin and
Westelius (2008) suggest
that the higher the uncertainty about the inflation process, the
wider should the target
range be. This is true for emerging market countries, which are
more vulnerable to
external shocks and likely to have more uncertainty about
inflation outcomes.
Empirical Evidence in South Africa
Most of the literature on inflation targeting in South Africa (e.g.
du Plessis and Burger,
2006; Fedderke and Schaling, 2005; Nell, 2002 and Pretorius
and Smal, 1994) indicates
the existence of trade-off, in the short run, between inflation
and unemployment or
between inflation and proxies for demand effects such as
marginal costs and output gaps.
Early studies, which were conducted in the 1960s and 1970s,
find trade-off between
19. inflation and unemployment (e.g. Gallaway, Koshal and Chapin
(1970); Hume (1971);
Hodge (2002); du Plessis and Burger (2006)) - and between
inflation and output gaps
(e.g. Krogh (1967); Truu (1975); Strydom and Steenkamp
(1967);du Plessis and Burger
(2006)). Recent studies based on output gaps (Pretorius & Smal,
1994; Fedderke &
Schaling, 2005; Nell; 2002) mainly find evidence of trade-off
between inflation and
output gaps. Studies, based on expectations-augmented Phillips
curve of South Africa
(Pretorius and Smal, 1994 and Fedderke and Schaling, 2005),
find that the trade-off
occurs indirectly through labour costs rather than through
prices.
More recent studies (Leshoro, 2012; Phiri, 2010; Gupta and
Uwilingiye, 2008)
demonstrate that the 3%-6% inflation target range limits the
level of economic growth in
South Africa. Leshoro (2012) asserts that an inflation rate
greater than 4 percent has a
negative effect on GDP growth rates. Gupta and Uwilingiye
(2008) assert that a 3% to
20. 6% inflation target range results in a welfare loss, which ranges
from 0.34 percent to 0.67
percent of GDP. Phiri (2010:354) find an inflation threshold of
8 percent and concludes
18
that any inflation rate below and above the threshold will have
an adverse effect on
growth.
Methodology
To determine the optimal level of inflation target in South
Africa, this paper follows the
methodology developed by Ball and Mankiw (2002), which rests
on the premise that
there is a short run trade-off between inflation and
unemployment. Given the existence of
the short run trade-off, Ball and Mankiw (2002) show that there
exists a level of
unemployment that is consistent with stable inflation. The
unemployment level that
corresponds with a stable inflation is known as the non-
21. accelerating inflation rate of
unemployment (NAIRU) (Gordon, 1997 and Ball & Mankiw,
2002). Thus, this paper
uses an expectations-augmented Phillips curve to estimate a
time-varying NAIRU for
South Africa from 1980 to 2015. The NAIRU is not directly
observable but is estimated
based on variables which are used to determine an expectations-
augmented Phillips curve
(see Staiger, Stock, and Watson, 1997; Boone, Giorno, Meacci,
Rae, Richardson and
Turner, 2003). To determine if the SARB target is set at a level
that optimises the trade-
off between inflation and unemployment, the estimated NAIRU
is used to determine a
stable inflation rate for South Africa. The inflation rate, based
on the estimated NAIRU,
is then compared to the inflation target range that is adopted by
the South African
Reserve Bank. .
The short-run trade-off between inflation and unemployment
can be expressed
as:
22. Where � represents the inflation rate; � represents the
parameter which represents a constant term in the equation; and
which measures how the inflation rate responds to changes in
the unemployment rate.
Nonetheless, the amended version of the inflation-
unemployment dynamics is
represented as:
Where
e
*
2 shows that the actual inflation depends on the expected
inflation and how U deviates
from
*
U . Supply shocks, such as oil crisis and changes in the
exchange rate, may affect
23. also the level of inflation.
Ball and Mankiw (2002:118) acknowledge that economic agents
base their
decisions on adaptive expectations
1
. Thus, the expectations-augmented Phillips curve,
which is based on adaptive expectations, is thus presented as
follows:
19
UU
*
1 (3)
Where �−1 represents the inflation rate observed during the
previous period.
The expectations-augmented Phillips curve, as represented by
equation 3 above,
is used as a base to derive an estimate of a time-varying NAIRU
that is used to determine
24. a stable inflation rate. Ball and Mankiw (2002) show that to
estimate the NAIRU,
Equation 3 should be rewritten as:
*
(4)
becomes:
UU (5)
-hand
side of Equation 5 can be
computed to provide the estimate of
25. *
U . Ball and Mankiw (2002) suggest the use
of Hodrick-Prescot (HP) filter to obtain
*
U , which represents the longer-term trend and
, the shorter-term supply shock or cyclical movement. The
inflation rate, which
corresponds to the natural rate of unemployment, is estimated
by imputing values for
parameters derived above into Equation 4.
Data and Empirical Results
In this study, we use the headline inflation rate
official unemployment rate
based on the narrow definition ( U ) to evaluate the
appropriateness of the current
inflation target range. Quarterly data from 1980 to 2015 is used
are sourced from Quantec. In order to estimate the NAIRU (
*
26. U ) we estimate the
U have a unit root, we
have to test if there is a cointegrating relationship between
these variables by making use
of the Engel-Granger cointegration test. It is important to note
that the choice of the
Engle-Granger cointegration over other cointegration
techniques, such as the Johansen
technique, is justified by the fact the Engle-Granger
cointegration technique is robust
even when series are fractionally integrated or depict long
memory (Gonzalo and Lee,
2000). Gonzalo and Lee (2000) show that it is very difficult to
distinguish between series
20
that are fractionally integrated and those that have unit root
(I(1)). By applying the Engle-
Granger cointegration technique, we believe that the results
obtained will be robust even
27. though the series are fractionally integrated or have long
memory. Moreover, Silvapulle
and Podivinski (2000) indicate that modellers should not be
concerned by the possibility
of small departure from the condition of non-normality when
using cointegration
technique even in finite samples. However, the authors
emphasise that ARCH and
GARCH effects may be more problematic and compromise the
results obtained from a
cointegration technique. The results of the Engle-Granger
cointegration test are reflected
on Table 1. The results show that the null hypothesis of no
U is rejected when inflation is an endogenous variable.
The study adopts the results of the Engle-Granger cointegration
test and
estimated the cointegrating parameter in the relationship
between unemployment and
inflation. The estimation, as per Equation 1, yields a value of
estimated equation is represented as:
28. TABLE 1. RESULTS OF THE ENGLE-GRANGER
COINTEGRATION TEST
is endogenous
Given the above suggestion by Silvapulle and Podivinski
(2000), we need to make sure
that there is no ARCH effect in the results obtained. Thus, we
perform the
heteroscedasticity test to examine the presence of the ARCH
effect in the obtained
results. Table 2 presents the results of the ARCH test for
heteroscedasticity in the
residual. This test aims to detect the presence of time-varying
volatility or ARCH effect
in the residual. The results presented in Table 2 show that the
null hypothesis of no
ARCH is not rejected with the F-statistics and the observed R-
Squared. This indicates
that the residual is homoscedastic and there is no need to
account for time-varying
volatility in the estimated model.
29. TABLE 2. HETEROSCEDASTICITY TEST: NULL
HYPOTHESIS OF NO ARCH
F-Statistics 1.707
Probability 0.2001
Obs R-Squared 1.724
Probability Chi-Square 0.1892
Note: The probabilities show the rejection of the null hypothesis
rate of unemployment as per
the procedure described above by using the HP filter. Figure 1
below provides a
diagrammatic representation of South Africa’s NAIRU, together
with the headline
inflation and actual unemployment rate, from 1980 to 2015.
Variable z-statistic Probability
-29.6342 0.0214
U -18.20813 0.2031
21
30. FIGURE 1. GRAPHICAL REPRESENTATION OF SOUTH
AFRICA'S
ESTIMATED NAIRU, INFLATION AND UNEMPLOYMENT
FROM 1980 TO
2015
Figure 1 shows that the estimated time-varying NAIRU
increases substantially from
single digit figures in the 1980s to double digit figures from the
late 1980s to 2000. From
the year 2000 to 2015, the NAIRU stabilises around 23 to 25
percent. In Kabundi et al.
(2015) and Viegi (2015) we find support for these findings as
both studies show that the
NAIRU stabilises around these rates in South Africa. Figure 1
further shows that the
unemployment rate is below the NAIRU during the period 1994
to 1997. This period
corresponds to increasing economic activities in South Africa.
However, the
unemployment rate in South Africa trended above the NAIRU
during the period 1998-
2000 marking the period of contagion from the Russian and
31. Latin American financial
crises and during the period post 2008, signifying the effects of
global financial crisis o n
the South African labour market. The trend of unemployment
compared to the NAIRU is
an evidence of the contribution of external shocks to the labour
market and economic
activities in South Africa.
It is clear from Figure 1 that the relationship between inflation
unemployment and NAIRU is far from supporting the evidence
of a vertical Phillips
curve in South Africa, especially after 2004. Figure 1 shows
that deviation of
unemployment rate from NAIRU translates to changes in
inflation rate. For example, in
the period 2004-2008 the unemployment rate in South Africa is
below the NAIRU. This
deviation of unemployment rate from the NAIRU coincides with
the increase in inflation
rate in South Africa. However, during the period of global
financial crisis and the
afterward of the crisis, unemployment soars above the NAIRU
as inflation rate decreases.
32. This finding indicates thatthe difference between the NAIRU
and unemployment
coincide with the change in inflation in South Africa as per the
theory of the augmented
Phillips curve. This occurrence indicates that actual inflation is
not only influenced by
inflation expectations but also by the deviation of the
unemployment rate from the
NAIRU. This further shows that the Phillips curve is not
vertical in South Africa, as
actual inflation does not depend solely on inflation
expectations. The final step of the
analysis is to obtain estimates of the stable inflation rate that
would minimise the trade-
8
12
16
20
24
28 0
4
8
33. 12
16
20
1980 1985 1990 1995 2000 2005 2010 2015
inflation
unemployment
NAIRU
22
off between inflation and unemployment. The estimates from
Equation 3 yield a rate of
inflation, which ranges from 1.4 percent to 11.5 percent from
2000 to 2015. Figure 2
derived from the South
African NAIRU ( InflaN ).
FIGURE 2. SOUTH AFRICA'S INFLATION RANGE BASED
ON ESTIMATES
OF NATURAL RATE OF UNEMPLOYMENT (INFLAN) AND
THE ACTUAL
35. any medium, provided the original author and source are
credited..
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AND PRACTICE
ISSN 1648-0627 / eISSN 1822-4202
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2019 20: 1–10
https://doi.org/10.3846/btp.2019.01
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Introduction
Post global financial crises (2008) have forced countries
to adopt expansionary and stimulating macroeconomic
policies aiming to reduce unemployment. Some countries,
such as United Kingdom, Germany, and the United States
of America have become successful in lowering the unem-
ployment in their labor markets. However, Spain and Italy
are stuck at high rates of unemployment with rigid labor
markets (Bhattarai 2016). The unemployment could be
stabilized towards their natural rates by stimulating the ag-
gregate demand through fiscal or monetary policies with or
without some increase in price levels (Keynes 1936, Phllips
1958, Benati 2015, Blanchard 2016).
Short-term economic problems, such as inflation and
unemployment are among the most notable macroeco-
nomic problems all the time (Al-zeaud 2014, Arshad 2014,
Bhattarai 2016, Caporale and Škare 2011, Cioran 2014,
36. Furuoka 2007, Furuoka 2008, Israel 2015, Katria et al.,
2011, Kogid et al. 2011, Mahmood et al. 2013, Okafor et al.
2016, Sa’idu and Muhammad 2015, Ştefan and Bratu 2016,
Thayaparan 2014, Touny 2013, Umaru and Zubairu 2012,
Zaman et al. 2011, Pallis 2006, Benati 2015, Blanchard
2016). The Indonesian government started to focus on
inflation when Indonesia experienced an economic shock
during the transition period (1965–1969). Fortunately, the
Indonesian government managed to control the inflation
rate as Indonesia only had an inflation rate of below 10%
in 1969 (Bank Indonesia 2004). However, the monetary
crisis hit Indonesia again in 1997–1998 that resulted in the
inflation rate of 58.4%. During the post-monetary crisis
period, Indonesia managed to recover that caused the infla-
tion rate to be below two digits. Further, the global financial
crisis hit the global economy in 2008, but the Indonesian
inflation rate remained stable. One of the likely factors of
this condition is the government’ various economic rescue
programs such as the tight money or contractive policy
that was effective in taming the inflation rate. Besides, the
Inflation Targeting Framework that was implemented by
Bank Indonesia (the Indonesian central bank) since July
THE CAUSALITY BETWEEN INFLATION AND
UNEMPLOYMENT:
THE INDONESIAN EVIDENCE
Gatot SASONGKO1, Andrian Dolfriandra HURUTA2
Universitas Kristen Satya Wacana, Salatiga, Indonesia
E-mails: [email protected] (corresponding author);
[email protected]
Received 21 June 2018; accepted 05 September 2018
Abstract. Two closely watched indicators of economic
37. performance are inflation and unemployment. This study
empirically
analyzes the causality between inflation and unemployment in
Indonesia during 1984 to 2017. The data were gathered from
the Indonesian Central Bureau of Statistics. Methodologically,
this study employed the Granger Causality test and Vector
Autoregression to determine the causality between inflation and
unemployment. The results show that there is a one-way
causality
between inflation and unemployment. The findings imply that
unemployment causes inflation, but not vice versa. Next
inflation
and unemployment are also closely related to other determining
factors, such as season, household income, and the decisions
to attend school or to perform the housekeeping.
Keywords: granger causality, inflation, unemployment, vector
autoregression.
JEL Classification: E600, E610.
http://creativecommons.org/licenses/by/4.0/
https://doi.org/10.3846/btp.2019.01
https://doi.org/10.3846/btp.2019.01
mailto:[email protected]
mailto:[email protected]
2005 (Bank Indonesia 2017) and the empowerment of the
Regional Inflation Monitoring Team in each local region fa-
cilitated further the inflation control (Sasongko and Huruta
2018).
The high inflation rate in 1965 also caused a high un-
employment rate (read: stagflation). Since 1965, the unem-
ployment rate has increased by 5–6% per year. However,
38. similar to the inflation rate, the Indonesian government
managed to reduce the unemployment rate to less than 10%
(Bank Indonesia 2004). Every government closely monitor
inflation and unemployment as the two main economic
performance indicators. Statisticians combine inflation and
unemployment data to develop the misery index that aims
to measure the health of an economy. One of the economic
principles is the short-term trade-off between inflation and
unemployment. If fiscal and monetary policymakers in-
crease aggregate demands and economy along the short-run
aggregate demand curve, they can reduce unemployment
temporarily, albeit with an increase in inflation rate. On
the other hand, if monetary and fiscal policymakers reduce
aggregate demands and economy along the short-run aggre-
gate demand curve, they can curb inflation but also increase
unemployment temporarily (Mankiw et al. 2013).
This study aims to investigate the trade-off between in-
flation and unemployment as found by Phllips (1958) espe-
cially on the causality between inflation and unemployment
in Indonesia during 1984 to 2017. It is clear the importance
to recognize the relationship between inflation and unem-
ployment when determining the macroeconomic policies
for an economy. Despite the availability of several studies
that examined the Phillips curve hypothesis, there is still a
shortage of applied studies that investigate this hypothesis
under developing countries where the majority of research
has concentrated on the developed nations. The outcomes
of this study may help policymakers to formulate better
policies that can achieve their objectives of price stability
and full employment in Indonesia.
1. Literature review
Several studies have investigated the relationship between
inflation and unemployment. Al-zeaud (2014) does not find
39. a causal relationship between inflation and unemployment
in Jordan because the study does not include foreign labor
when measuring the unemployment level, thus inhibiting
the trade-offs between these two variables in the short term.
Further, Furuoka (2008) also does not find the causality
between inflation and unemployment in the Philippines.
The socioeconomic factors such as the output gaps likely
explain the Phillips curve better in the Philippine context.
In Nigeria, Umaru and Zubairu (2012) indicate that there
is no causality between inflation and unemployment. The
findings suggest that the Phillip curve does not apply in
Nigeria and it is necessary to use the unemployment or
inflation theory that is based more on the Nigerian data
and situation.
Besides studies that show no causal relationship between
inflation and unemployment, Caporale and Škare (2011)
demonstrate that there is a one-way causal relationship
between inflation and job opportunities. Their findings,
based on the study on the Organisation for Economic Co-
operation and Development (OECD) countries, thus sug-
gest that inflation affects job opportunities, but not the way
around. This condition recommends policymakers to pay
more attention to the short-term and long-term job and
output growth. In Malaysia, Furuoka (2007) also finds the
one-way causality between inflation and unemployment,
implying that inflation leads to unemployment but not the
way around. The study also demonstrates the cointegration
and causal relationship between inflation and unemploy-
ment in Malaysia. In other words, the results confirm the
existence of the Phillips curve. Still in the same country,
Kogid et al. (2011) document the one-way causality be-
tween inflation and unemployment. Their findings imply
that inflation causes unemployment, but not vice versa. The
results also confirm the trade-off relationship between infla-
40. tion and unemployment in Malaysia and the government
needs to ensure that the economic policies will facilitate
sustainable economic growth in the future. Using the US
data, Ştefan and Bratu (2016) also find the one-way rela-
tionship between inflation and unemployment, suggesting
that inflation explains unemployment but not vice versa.
Their findings suggest that policymakers should develop
programs that reduce unemployment such as productive
labor projects while at the same time also control inflation.
Besides, the programs should focus on replacing foreign
labors with local labors and on ensuring that the aggregate
demands reach the optimal unemployment and inflation
levels that will eventually support the long-term economic
growth. The Pakistani study of Mahmood et al. (2013)
demonstrate the one-way causality between inflation and
unemployment, implying that inflation affects unemploy-
ment but not the way around. The study also suggests that
the Pakistani policymakers maintain the equilibrium point
between inflation, unemployment, and interest rate to con-
trol for economic shocks. Lack of focus on one of the three
variables likely affects the economy. Still using the Pakistani
data, Zaman et al. (2011) find the long-term relationship
and one-way causality between inflation and unemploy-
ment, denoting that inflation causes unemployment but not
vice versa. The results also indicate that increasing inflation
likely increases employment opportunities that eventually
facilitates growth. The study empirically confirms the ex-
istence of the Phillips curve in Pakistan, both in the short-
term and in the long-term. Nigeria also exhibits the one-way
causality between inflation and unemployment by Sa’idu
2 G. Sasongko, A. D. Huruta. The causality between inflation
and unemployment: the Indonesian evidence
41. and Muhammad (2015) that indicating inflation leads to
unemployment but not the other way around. Their results
recommend the joint efforts of all policymakers to restruc-
ture the economy to manage price instability and improve
the infrastructures.
Further, Katria et al. (2011) who analyze the South Asian
Association for Regional Cooperation (SAARC) countries,
find a negative relationship between inflation and unem-
ployment. Their results indicate that the collaboration be-
tween monetary and fiscal policies manages to stabilize the
business cycle. Next, the Nigerian study by Okafor et al.
(2016) indicates that inflation negatively affects unemploy-
ment. Their results recommend that policymakers not only
rely on monetary targets but also on output targets through
the economy deepening to maintain the optimal inflation
rate and the minimal unemployment level. In a similar vein,
Cioran (2014) demonstrates that inflation negatively affects
unemployment in Romania and the European Union (EU).
The findings suggest that inflation rate is an effective instru-
ment to prevent increasing unemployment in the EU and
Romania.
Besides the negative results, other studies find the pos-
itive relationship. For example, using the Egyptian data,
Touny (2013) documents that unemployment positively
affects inflation in the long run. The results recommend
that policymakers implement their monetary policies
to overcome the inflationary pressure regardless of the
negative effects of unemployment. Further, Israel (2015)
who analyzes several developed countries such as France,
Germany, the UK, and the US, show the long-term posi-
tive relationship between inflation and unemployment.
This positive relationship is closely related to the political
intervention. The condition causes two problems, namely:
(1) monetary expansion on the income and wealth distribu-
42. tion leads to the increasing gap between the poor and the
rich. The increasing gap causes the labor market to be less
flexible and increases unemployment, (2) monetary expan-
sion causes less fluctuation but eventually increases unem-
ployment. Using the Uni European Countries data, Pallis
(2006) investigated the relationship between inflation and
unemployment in the 10 new European Union countries
find that in almost all countries the interaction between the
price inflation rate and the unemployment level took place
in a rather long time period, reaching in some cases the
lag of year four. In Pakistan, Ul-Haq et al. (2012) provided
further support for the existence of a long-term relationship
between unemployment and inflation. On the other hand,
the outcomes of VECM revealed a positive and significant
correlation between inflation and unemployment either in
the long term or the short term.
Other studies demonstrate the two-way causality be-
tween inflation and unemployment. For example, Arshad
(2014) shows the two-way causality between inflation rate
and unemployment in Pakistan, implying that inflation
causes unemployment, and unemployment causes infla-
tion. The data suggest that inflation rate explains the vari-
ance of unemployment better than economic growth while
unemployment contributes to the variance of inflation more
than economic growth. In Sri Lanka, Thayaparan (2014)
finds the two-way causality between inflation and unem-
ployment, implying that inflation causes unemployment
and unemployment causes inflation. The findings indicate
that both unemployment and inflation significantly affect
the Sri Lankan macroeconomic conditions. Next Bhattarai
(2016) finds bidirectional causality as well as cointegrating
relationships between unemployment and inflation among
the OECD countries. Estimates of a vector autoregression
(VAR) model on these trade-offs also support such hypoth-
43. esis.
Overall, these studies show varying results such as
one-way causality, two-way causality, and no causal rela-
tionship between inflation and unemployment. Further,
these studies also use different analytical models, such as
Granger Causality, Johansen Cointegration, Autoregressive
Distributive Lag, Error Correction Model, Vector Error
Correction Model, Panel Data, Vector Autoregression, and
etc. It can be concluded from the previous discussion that
there is an uncertain relationship between inflation and
unemployment of different economies in the certain period.
2. Research methods
This study uses the secondary data from the central bu-
reau of statistics and the world bank publication. More
specifically, the study relied on the time-series data from
1984 to 2017. Further Granger Causality and Vector
Autoregression used to analyze the data. Before running
the Granger Causality and Vector Autoregression model,
this study initially ran the stationary and the lag length test.
The following are the models for the stationary test and the
test statistic (Brooks 2008).
ΔYt = ϕYt – 1 + ϕt; (1)
. (2)
After running the stationary test, this study ran the lag
length test. There are various approaches to select the opti-
mal lag length, such as Likelihood Ratio, Final Prediction
Error, Akaike Information Criterion and Schwarz
Information Criterion (Rosadi 2012). This study uses the
Akaike Information Criterion (AIC). The minimum value
44. of the AIC suggests the optimal lag (Ivanov and Kilian
2005). After completing the lag length test, this study ran
the Granger Causality test (Rosadi 2012):
(3)
Business: Theory and Practice, 2019, 20: 1–10 3
(4)
The above equation indicates that Xt is inflation, and
Yt is unemployment, while μt and Vt are error terms that
are assumed to contain no serial correlation and m = n =
r = s. The Granger Causality test produces four possible
results as represented by the following equations:
1. If Σaj ≠ 0 and Σbj = 0, then there is a one-way
causality from inflation to unemployment.
2. If Σaj = 0 and Σbj ≠ 0, then there is a one-way
causality from unemployment to inflation.
3. If Σaj = 0 and Σbj = 0, then there is no causal re-
lationship between inflation and unemployment.
4. If Σaj ≠ 0 and Σbj ≠ 0, then there is a two-way
causality between inflation and unemployment.
Further, this study ran the Vector Autoregression
after completing the Granger Causality test. The Vector
Autoregression (VAR) is commonly used for forecast-
ing systems of interrelated time series and for analyz-
ing the dynamic impact of random disturbances on the
45. system of variables. The reduced form VAR approach
sidesteps the need for structural modeling by treating
every endogenous variable in the system as a function
of p-lagged values of all of the endogenous variables in
the system. The following is the equation in the Vector
Autoregression (p) with k-endogen variable yt = (y1t , y2t ,
…,ykt) (Lütkepohl 2006).
yt = A1yt–1 + … + Apyt–p + Cxt + ∈ t , (5)
where:
yt = (y1t , y2t ,…,ykt)′ is a k × 1 vector of endogenous
variables;
xt = (x1t , x2t ,…,xdt)′ is a d × 1 vector of exogenous
variables;
A1, …, Ap are k × k matrices of lag coefficients to be
estimated;
C is a d × k matrix of exogenous variable coefficients
to be estimated;
∈ t = (∈ 1t , ∈ 2t , …, ∈ kt)′ is a k × 1 white noise innova-
tion process, with E(∈ t) = 0, E(∈ t ∈ t′) = ∑∈ , and E(∈ t
∈ s′) = 0 for t ≠ s.
3. Results
Table 1 below shows the results of the stationarity test using
the Augmented Dickey-Fuller (ADF) method.
Table 1 indicates that inflation is stationary at the order
of integration of level or I(0) while the unemployment level
46. Table 1. Stationarity test
Variable p-value Conclusion
Inflation 0.0000* I(0)
Unemployment 0.3012 the series is not stationary
DUnemployment** 0.0000* I(1)
*indicates the rejection of the null hypothesis at 5% of
significance
level.
** DUnemployment implies that Unemployment at the first
diffe-
rence [I(1)].
Table 2. Lag length test
Lag LogL LR FPE AIC SC HQ
0 –151.4651 NA 197.5714 10.96179 11.05695 10.99088
1 –150.5083 1.708562 245.9338 11.17917 11.46464 11.26644
2 –145.1985 8.723246 225.3365 11.08561 11.56140 11.23106
3 –125.0476 30.22635* 72.08667* 9.931972* 10.59807*
10.13561*
4 –121.2335 5.176270 74.94396 9.945251 10.80167 10.20707
5 –120.3520 1.070367 97.66239 10.16800 11.21473 10.48800
*indicates the optimal lag.
is not stationary at the order of integration of level, prompt-
ing us to have the first difference technique. The order 1
or I(1) differencing shows that DUnemployment does not
contain the unit root anymore because it is now stationary.
Further, determine the optimal length of lag by using Lag
Length Test as can be seen in Table 2.
Table 2 suggests the optimal lag to indicate the depen-
dence of a variable on its lagged value and other endogenous
47. variables is lag 3, implying that we have to use lag 3 to inves-
tigate the causality between inflation and DUnemployment.
This decision is indicated by the Akaike Information
Criterion (AIC) value of 9.931972 that is smaller than the
AIC values at the other lags. After ran the lag length test, this
study ran the Granger Causality test using lag 3. The results
of Granger Causality test can be seen in Table 3.
Table 3 reveals that the null hypothesis proposing
that DUnemployment does not Granger Cause infla-
tion is rejected, implying that DUnemployment exhibits
the Granger Cause on inflation. The results suggest that
DUnemployment granger cause inflation, but not vice
4 G. Sasongko, A. D. Huruta. The causality between inflation
and unemployment: the Indonesian evidence
versa. The decision of rejecting the null hypothesis is based
on the probability value of 2.E-08 that is lower than α = 5%.
After ran the Granger Causality, this study ran the Vector
Autoregression. Variables in a Vector Autoregression
model are determined simultaneously and rely more on
historic patterns of data to establish relations between
unemployment and inflation than economic theories
(Bhattarai 2016). The results of Vector Autoregression
can be seen in Table 4.
Table 4 indicates that a simple Vector Autoregression
model with three lags on inflation and DUnemployment
shows that Inflation is significantly influenced by DUnem-
ployment(–2), DUnemployment(–3) and inflation(–1). It
implies that the influence of DUnemploy ment(–2), DUnem-
ployment(–3) and inflation(–1) have a large contribution to
the movement of inflation in Indonesia. Estimates of Vector
48. Autoregression also support by the Impulse Response
Functions (IRFs). The results of the Impulse Response
Functions (IRFs) can be seen in Figure 1.
Impulse Response Functions (IRFs) was calculated for
DUnemployment and inflation to address the reaction of
the economy to external changes (shocks). The results of
the IRFs analysis show that there is a trade-off between
inflation and DUnemployment as shown by the IRFs of
DUnemployment to inflation. Overall, estimate results of
Granger Causality, Vector Autoregression, and Impulse
Response Functions (IRFs) prove that the DUnemployment
is more instrumental to explain inflation in Indonesia.
Further, this result is supported by Touny (2013) who
finds the positive effect of unemployment on inflation. The
normalized cointegration equation reveals that unemploy-
ment gap has a long-run positive effect on the changes in
the inflation rate, which is consistent with “Lucas Critique”
where a policy of inflation would fail to reduce the unem-
ployment rate in the long run, because workers would
eventually adjust their expectations of inflation. Further,
the more rapid the reduction in the unemployment rate,
the less disinflation is achieved at each unemployment rate
level. Even at the cases where the unemployment rate is very
high, the inflation rate falls little and thus the economy is
moving too rapidly out of the recession (Pallis 2006). Other
findings by Ul-Haq et al. (2012) also suggest that policy
makers should pay special attention to this relationship
between inflation and unemployment when they are going
to design macroeconomic policies.
Thus, when inflation does not support DUnemployment,
it is necessary to analyze factors that affect DUnemployment.
Table 5 below presents the information on the number of
49. Table 3. Granger causality test
Pairwise Granger Causality Tests
Sample: 1984 2017
Lags: 3
Null Hypothesis: Obs F-Statistic Prob.
Inflation does not Granger Cause DUnemployment 30 0.72869
0.5454
Dunemployment does not Granger Cause Inflation 33.0657 2.E-
08
Table 4. VAR Model of inflation and DUnemployment for
Indonesia (1984–2017)
DUnemployment Inflation
Coefficients t-prob Coefficients t-prob
DUnemployment(–1) –0.135523 0.20747 0.709939 1.30180
DUnemployment(–2) –0.181229 0.20753 –6.937364 1.30223
DUnemployment(–3) 0.217161 0.24175 11.60203 1.51692
Inflation(–1) 0.024945 0.01742 0.421936 0.10934
Inflation(–2) 0.003714 0.01524 0.042180 0.09564
Inflation(–3) –0.006079 0.01513 0.021545 0.09495
Constant –0.186910 0.34132 4.400302 2.14168
R2 0.124570 0.813392
F-statistic 0.545466 16.70883
Log-likehood –39.33832 –94.43436
AIC 3.089221 6.762290
Swarz SC 3.416167 7.089236
Business: Theory and Practice, 2019, 20: 1–10 5
50. Figure 1. Impulse responses to DUnemployment and inflation
shocks
Table 5. The Population 15 Years of age or over by the main
employment status (2001–2017) (source: Badan Pusat Statistik
(2017a), processed))
Number Main Employment Status
2001 2017
Amount % Amount %
1 Self-employed 17,451,704 19.22 21,849,573 17.54
2 Employer Assisted by Temporary/ Unpaid Worker 20,329,073
22.39 21,275,899 17.08
3 Employer Assisted by Permanent/ Paid Worker 2,788,878 3.07
4,446,024 3.57
4 Employee 26,579,000 29.27 47,420,633 38.08
5 Casual Agricultural Worker 3,633,126 4.00 5,360,306 4.30
6 Casual Non-Agricultural Worker 2,439,035 2.69 6,021,760
4.84
7 Family/ Unpaid Worker 17,586,601 19.37 18,164,654 14.59
8 No Answer – – – –
Total 90,807,417 100.00 124,538,849 100.00
the population 15 years of age or over who worked by the
main employment status.
51. Table 5 indicates the sharp increase in the number of
the working-age population with the employee status, both
in absolute and relative terms. The number of employees
in 2001 was 26,579,000 or 29.7% of the total working age
population. The number increased to 47,420,633 or 38.08%
of the total working age population in 2017. Increased in-
vestment mainly drives the increasing number of employ-
ees. Djambaska and Lozanoska (2015), Yelwa et al. (2015),
Touny (2013), Israel (2015), Ul-Haq et al. (2012), Bhattarai
(2016), and Pallis (2006) support the results by arguing that
6 G. Sasongko, A. D. Huruta. The causality between inflation
and unemployment: the Indonesian evidence
investment is a determining factor in reducing unemploy-
ment.
Further, another factor that affects the number of un-
employment is the industry in which the population work.
Table 6 below shows the data on the population 15 years of
age or over who worked by industry.
The proportion of the population above 15 years who
worked at the primary sectors (agriculture, plantation,
forestry, hunting, and fishery) declined sharply. In 1991,
53.29% of the working population worked in the primary
sectors, and proportion declined to 31.74% in 2016. The
agricultural sector dominates the primary sectors because
of most population work in this sector (Thayaparan 2014,
Yelwa et al. 2015, Kebschull 1987, Israel 2015). Edelman
(2013) confirms the findings by suggesting that farmers
in Latin America and Indonesia live in communities with
exclusive land rights and most of them use the lands for
52. agricultural activities. The agricultural works in Indonesia
are heavily affected by the season factor, especially before
2005 because of the less developed irrigation system. More
specifically, the agricultural sector greatly depends on the
sufficient availability of rainfall. Farmers begin to culti-
vate their soils after rain falls. Rain usually starts to fall in
October and the dry season starts in April. The following
Table 6 displays the open unemployment level based on
the February and August surveys. February is in the rainy
season while August is in the dry season. The open unem-
ployment rate was higher in August, a month in the dry
season than in February, a rainy month. The average August
unemployment rate was 8,599,944 while in February the
average unemployment level was 8,599,676. The propor-
tion of the population working in the agricultural sector
was so high that the season factor significantly affected the
unemployment rate. However, the annual difference of the
unemployment level between these two months tended to
decline. There was even no difference of the open unemploy-
ment level between February and August in 2017 (Badan
Pusat Statistik 2017d). Further estimates of an Independent
Sample T Test also support the data. Estimate results can
be seen in Table 7.
The significance value (2 tailed) of 1.000 is bigger than
the tolerance value of 5% (0.05) implies that there is no
difference between February and August unemployment
rate. The more developed irrigation system reduce the farm-
ers’ dependence on rainfall and eventually on the season.
Next, the Indonesian working-age population who attended
Table 6. Population 15 years of age or over who worked by
main industry (1991–2016) (source: Badan Pusat Statistik
(2017b),
processed))
53. Number Main Industry
1991 2016
Amount % Amount %
1 Agriculture, Plantation, Forestry, Hunting, and Fisheries
39,385,946 53.29 38,291,111 31.74
2 Mining and Quarrying 551,581 0.75 1,311,834 1.09
3 Manufacturing Industry 7,712,468 1.43 15,975,086 1.24
4 Electricity, Gas, and Water 148,480 0.20 403,824 0.33
5 Construction 2,415,002 3.27 7,707,297 6.39
6 Trade, Restaurants, and Accomodation Services 11,190,391
1.14 28,495,436 23.62
7 Transportation, Warehousing, and Communication 2,475,803
3.35 5,192,491 4.30
8 Financial, Real Estate, and Business Services 515,401 0.70
3,481,598 2.89
9 Community, Social, and Personal Services 9,377,036 12.69
19,789,020 1.40
10 Undefined 139,516 0.19 – –
Total 73,911,624 100.00 120,647,697 100.00
Table 7. Independent Sample T Test for Unemployment on
February and August (1986–2017)
Levene’s Test
for Equality of
Variances
t-test for Equality of Means
F Sig. t Df
Sig.
(2-tailed)
54. Mean
Difference
Std. Error
Difference
95% Confidence Interval of
the Difference
Lower Upper
Unmpl
Equal variances
assumed
.002 .967 .000 24 1.000 –268.00000 6.06551E5 –1.25213E6
1.25159E6
Equal variances
not assumed
.000 23.945 1.000 –268.00000 6.06551E5 –1.25228E6
1.25174E6
Business: Theory and Practice, 2019, 20: 1–10 7
school or performed the housekeeping increased. The num-
ber of economically inactive women due to housekeeping
increased both in absolute and relative terms (Ehrenberg
and Smith 2012). …