Inflation
Faramarz Tahmasebi
Abstract
Inflation influences the assets’ price and return. In order to maintain the money value, investors are willing to invest in assets which maintain their purchasing power and bring them good returns, when they encounter inflationary conditions. Some assets have this function, including stocks, gold, ...
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Inflation influences the assets’ price and return. In order to maintain the money value, investors are willing to invest in assets which maintain their purchasing power and bring them good returns, when they encounter inflationary conditions. Some assets have this function, including stocks, gold, currency, housing, land, etc. This study aimed to review the effect of inflation on investment in a combination of physical and financial assets. The main research question is how the optimal investment portfolio of the people changes with the change of the inflationary conditions and the escalation of the inflation rate. For this purpose, the optimal combination of assets such as dollar, gold coins, stocks, corporate bonds, housing, bank deposits and land was extracted in different inflationary conditions during the period of 1991-2021 using Markowitz's mean-variance model. The results indicated that assets are moved in the people’s investment portfolio due to the change in the inflationary conditions. Where the inflation rate was lower than its 30-year average, the best investment combination for people were corporate bonds, housing, stocks and bank deposits, respectively. With the escalating inflationary conditions and the inflation rate higher than the 30-year average, the optimal investment portfolio includes corporate bonds, gold coins, stocks and land, respectively. Comparing the composition of assets in the first to fourth quartiles of inflation represented that the corporate bonds, housing, stocks and gold are the first priorities of people's investment.
Hsiao's Causality
Mohammad Taher Ahmadi; Mohammad Ali Fallahi; Somayeh Khosravi
Volume 1, Issue 3 , January 2012, , Pages 234-203
Abstract
Interest as investment opportunity cost or cost of required credits in production process plays an important role in cost of goods manufactured. So it is expected that inflation rate might be affected by changes in interest rate. The present paper studies causality relation between changes in interest ...
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Interest as investment opportunity cost or cost of required credits in production process plays an important role in cost of goods manufactured. So it is expected that inflation rate might be affected by changes in interest rate. The present paper studies causality relation between changes in interest rate and inflation rate in countries of Mena. Quarterly data concerning interest and inflation rates were analyzed in 16 member countries in Mena in the period 1997-2008. Augmented Dicki-Foler and Philips structural failure tests were used to assess the reliability of time series data .To determine causality relation between two variables of interest and inflation, Granger and Hsiao's causality tests were utilized. The results obtained from Hsiao's and Granger causality tests indicate that the research hypothesis is supported only for Qatar and Djibouti. In other words, in both countries there is a causality relation from changes in interest rate to changes in inflation rate but there isn't such relation in other countries. Considering the results of research, it can be said that policy of reduced interest rate can't lead us toward the intended goal of controlling inflation rate
