Excess Money Growth and Inflation Dynamics

This paper analyses 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 inflatio...

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Bibliographic Details
Published in:International finance (Oxford, England) England), 2007-12, Vol.10 (3), p.241-280
Main Authors: Roffia, Barbara, Zaghini, Andrea
Format: Article
Language:English
Subjects:
Economic growth
Economic theory
Housing prices
Industrialized nations
Inflation
International
Studies
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Summary:This paper analyses 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 that are not associated with sustained credit increases and strong dynamics in other asset prices seem to be less likely to have inflationary consequences and are thus less worrying from a policy perspective.
ISSN:1367-0271
1468-2362
DOI:10.1111/j.1468-2362.2007.00206.x