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Terms and Words related to Banking

Feb

19

2013

Housing Price Index

Th launch of the Nation Housing Bank  ( NHB ) RESIDEX in India in 2007 was a maiden efforts to capture the trend of price movement in residential property on a comprehensive scale . Initially 2001 was taken as the base year for the NHB RESIDEX  and price movement during the period 2001 – 05 were captured for five cities ( Banglore  , Bhopal , Delhi , Kolkata and Mumbai ) Subsequently , based on data from the housing finance companies ( HFCs) and national council of Applied Economic Research ( N CA ER ) the NHB RESIDEX was updated for two years , 2006  and 2007 . The NHB RESIDEX has now been expanded to fifteen cities , namely Banglore , Bhopal , Delhi , Kolkata , Mumbai , Ahemdabad , Faridabad , Chennai , Kochi , Hyderabad , Jaipur ,Patna , Lucknow , Pune and Surat and updated up to December 2008 with 2007 as the new base year . From 2008 the HNB RESIDEX is being updated on half – yearly basis .

Inflation related terms

Deflation – A great decline in price often caused by a reduction in the supply of money or credit . Deflation can be caused also by a decrease in government , personnel or investment  spending .The opposite of inflation , deflation has the side effect  of increased unemployment since there is a lower level  of demand in the economy , which can lead to an economic depression . Central banks attempts to stop severe deflation , along with inflation , in an attempt to keep excessive drop  in price to a minimum .

Hyperinflation

Extremely  rapid or cut of control inflation . There is no precise numerical definition to hyperinflation . Hyperinflation is a situation where the price increases are so out of control that the concept of inflation in meaningless.

Stagflation – A condition of slow economic growth and relatively high unemployment – a time of stagnation – accompanied by a rise in prices , or inflation .

Disinflation – A slowing in the rate of price inflation . Disinflation is used to describe instances when the inflation rate has reduced marginally over short term. It is used to describe periods of slowing  inflation .

Reflation – Reflation is the act of stimulating  the economy by increasing the money supply or by reducing taxes . It is the opposite of disinflation . It can refer to an economic policy whereby a government uses fiscal or monetary stimulus in order to expand a country’s output. This  can possibly be achieved by methods that include reducing tax , changing the money supply , or even adjusting interest rates . Just as disinflation is considered an acceptable antidote to high inflation , reflation is considered  to be an antidote to deflation ( Which , unlike inflation , is considered bad regardless how high it is)

Agflation – An increase in the price of food that occurs as a result of increased demand from human consumption and use as an alternative energy resource . While the competitive nature of retail supermarket  allows some of the effects of agflation to be absorbed , the price increases that agflation causes are largely passed onto the end consumer . The term is derived from a combination of the word “ “agriculture” and “inflation “

Inflation Hedge

Inflation hedges is an investment with intrinsic value such as oil , natural gas , gold farmland and to a lesser degree commercial real estate . Typically most hard assets are an excellent inflation hedge . In general , commodities/ hard assets are negatively correlated to both stocks and bonds . In other words , when stocks and bonds decline , commodities tend to appreciate.

 

GDP Deflator – GDP  deflator is a measure of the price of all goods and services included in Gross Domestic Product ( GPD ) . The US Commerce Department Publishes a deflator series for US GDP , Defined as its nominal GDP measure divided by its real GDP measure .

Hoarding –  People buy durable and or  non – perishable commodities and other goods as stores of wealth  to avoid the losses expected from the declining purchasing power of money , creating shortages of the hoarded goods .

Phillips Curve – Phillips curve is a historical inverse relationship between the rate of unemployment and the rate of inflation in an economy Stated simply , the lower the unemployment in an economy , the higher the rate of inflation . While it has been observed that there is a stable short run tradeoff between  unemployment and inflation , this has not been in the long run .

 

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