Excess Money Growth and Inflation Dynamics

44 Pages Posted: 27 Mar 2008

See all articles by Andrea Zaghini

Andrea Zaghini

Bank of Italy

Barbara Roffia

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2008

Abstract

The paper analyzes the short-run impact of periods of strong monetary growth on inflation dynamics for 15 industrialized economies. We find that when robust money growth is accompanied by large increases in stock and house prices and loose credit conditions, the probability of recording an inflationary outburst over a three-year horizon is significantly increased. In contrast, significant money stock expansions which are not associated with sustained credit increases and strong dynamics in other asset prices seem to be less likely to have inflationary consequences and thus, less worrying from a policy perspective.

Keywords: Inflation, money growth, quantity theory of money

JEL Classification: E31, E40

Suggested Citation

Zaghini, Andrea and Roffia, Barbara, Excess Money Growth and Inflation Dynamics (January 2008). Bank of Italy Temi di Discussione (Working Paper) No. 657, Available at SSRN: https://ssrn.com/abstract=1105747 or http://dx.doi.org/10.2139/ssrn.1105747

Andrea Zaghini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Barbara Roffia

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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