Archive for January 19th, 2023

Recession worries have replaced inflation concerns

January 19, 2023

In this oped in moneycontrol, I argue how quickly the recession worries have repalced inflation concerns.

Macro Effects of Formal Adoption of Inflation Targeting

January 19, 2023

Surjit Bhalla, Karan Bhasin  and Prakash Loungani in the new IMF paper:

We examine the impact of formal adoption of inflation targeting (IT) on inflation, growth and anchoring of inflation expectations in advanced economies and emerging markets and developing economies (EMDEs).

Our paper reports several findings relevant to assessing the success of IT regimes. We find that while the early adopters of IT (pre-2000) all saw declines in inflation rates following adoption, IT adopters since then have enjoyed such success in only about half the cases. Since there is not much difference, on average, between IT and non-IT countries in mean inflation, inflation volatility and the extent of inflation anchoring, it is not easy to sort out what role IT has played in ensuring good outcomes; in particular, we cannot rule out the possibility that the success of IT may be due to ‘regression to the mean’.

Our country-level analysis—using the Synthetic Control Method (SCM) to compare outcomes in IT countries to a synthetic cohort—shows that IT adoption delivers significant inflation gains in about a third of the cases. At the same time, we also find limited support for the concern that adoption of IT systematically leads to poorer growth outcomes. At a time when central banks are struggling to keep inflation in check, our results suggest that the belief that IT adoption will be sufficient to achieve this goal cannot be taken for granted.

Determinants of Financial Literacy and Financial Inclusion in North-Eastern Region of India: A Case Study of Mizoram

January 19, 2023

Bhartendu Singh, Raj Rajesh, Ramesh Golait and K. Samuel L in this RBI study discuss finacial inclusion in Mizoram:

The study evaluates the determinants of financial inclusion and financial literacy in the under-banked north-eastern region of India based on primary data collected through a survey in the State of Mizoram. A total of 523 respondents were selected from eight blocks covering four districts of Mizoram. The key findings of the study are as follows:

    1. The level of financial awareness in the region was limited – about 32 per cent of the respondents were not aware of any financial products other than the savings bank account.
    2. About 20 per cent of the respondents reported lack of knowledge about basic payment options, and about 43 per cent of the respondents reported lack of usage of available options despite awareness.
    3. About half of the respondents were found to be unaware of financial institutions other than banks, viz., non-banking financial companies, microfinance institutions and small finance banks.
    4. Use of life insurance cover was low among the respondents.
    5. The Financial Inclusion score and Financial Literacy score for the study region were generated using the OECD/INFE (Organisation for Economic Co-operation and Development/International Network on Financial Education) Toolkit. The estimated average financial literacy score was 14.37 on a scale of 0 to 21 (i.e., 68.43 per cent) and the average financial inclusion score was 3.35 on a scale of 0 to 7 (i.e., 47.86 per cent).
    6. Among the identified factors, the place of residence (block), employment type and nature of family (joint versus nuclear) of the respondents were seen to strongly influence their financial inclusion and financial literacy status.

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