gender differential paper IJCRB

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JUNE 2011
INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS VOL 3, NO 2
The magnitude of change in monetary policy and how it affects inflation, production and
the relationship in between the two: understanding of this phenomenon is deficient and it
needs fresh inquiry. (Qayyum, 2008)
In order to control money supply and inflation into the market, it is necessary to improve
the measurement of money circulation into the market. (Qayyum, 2008)
The associations linking interest rates and price changes have been a matter of significant
investigation. Lot of work centers around interest rate study through taking price as one of
the independent variables but a little effort have taken made to study prices in context to
interest rate changes (Gul and Ekinic, 2006)
An interest rate procedure can recover the performance of interest rates and prices. The
links among money development, price increases and interest rates are very untrustworthy.
Sufficient space is available for the betterment (Alvarez et al, 2001)
Additional investigation is required to discover whether inflation risk influences further
variables which in due course affect the gauge of financial movement (Berument, 1999)
2. Literature Review
Mishkin (1995) tries to reinvestigates the behavior of real interest rates and searches the
answer that whether real interest rates are positively or negatively correlated with nominal
rate and expected inflation or not. This study of Mishkin tries to find out the performance
of interest rates, whether it is changing or not, related to nominal interest rates and
inflation. It takes consumer price index and Treasury bill rate as the key variables to test the
relationship empirically. The results show negative correlation of real interest rates with
inflation and real interest rates are having significant negative relation with the nominal
interest rates.
From the viewpoint of an asset-pricing model, the active performance of price in context to
interest rate is studied by Pennacchi (1991). The reason behind using this model is that it
allows the interdependent of price and interest rates which is justifiable on the empirical
basis. His findings indicate that Treasury bill rates and consumer price index are
significantly negatively correlated. According to the study, Treasury bill rates also show
great volatility and weak mean reversion than expected inflation. In the government policy,
the money growth is not leading to change in real return and this is what empirically
proved by this study. The results of this research are constant with this policy of
government.
Nelson (2008) explains long-term real causes of inflation. According to this, prices and
interest rates can be managed by controlling money growth rate. Nelson is responding
towards the argument of Woodford which claims that rise in price can be explained through
the financial authority’s interest rate policy. Woodford considers short-term interest rate as
a key tool to manage inflation. Nelson says about Woodford’s study that its results are
accurate but are based on high level assumptions. Nelson is focusing on money growth to
determine inflation. The study suggests money supply as a key determinant of inflation.
Dwyer (2001) uses currency, prices and nominal income to measure the relationship
between currency and price level. The rationale of the study is to observe whether money
supply in terms of broad money determines inflation or not. It takes Treasury bill rate as a
short-term rate and broad money to measure relationship. It concludes that in the long run
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