Global Liquidity, Money Growth and UK Inflation

17 Pages Posted: 8 Dec 2016 Last revised: 29 Jun 2018

See all articles by Michael Ellington

Michael Ellington

University of Liverpool

Costas Milas

University of Liverpool

Date Written: March 23, 2018

Abstract

This paper uses tools from the classical theory of inflation for UK Consumer Price Inflation from 1970Q1 to 2017Q4. In particular, we adopt augmented Phillips curve type equations within a linear and regime-switching framework where regimes are governed by previous inflation rates. Our non-linear models show that a monetary explanation of inflation is prominent during periods of high inflation. However our models imply that during periods of high inflation, The Bank of England should monitor monetary conditions in conjunction with monetary policy stance; as these can help dampen inflation persistence.

Keywords: Global Liquidity, Inflation, Divisia Money, Non-linear Model

JEL Classification: C5, E5

Suggested Citation

Ellington, Michael and Milas, Costas, Global Liquidity, Money Growth and UK Inflation (March 23, 2018). Available at SSRN: https://ssrn.com/abstract=2882494 or http://dx.doi.org/10.2139/ssrn.2882494

Michael Ellington (Contact Author)

University of Liverpool ( email )

Chatham Street
Liverpool, L69 7ZA
United Kingdom

Costas Milas

University of Liverpool ( email )

Chatham Street
Liverpool
United Kingdom

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