A global perspective on inflation and propagation channels

Luca Gattini, Huw Pill and Ludger Schuknecht

No 1462, Working Paper Series from European Central Bank

Abstract: This paper revisits the evidence on the monetary policy transmission channels. It extends the existing literature along three lines: i) it takes a global perspective with aggregate series based on a broader set of countries (ca 70% per cent of the global economy) and a longer time (1960-2010) than previous studies. It, thereby, internalises potential international transmission channels (i.e. via global commodity prices); ii) it examines the interaction between monetary variables, asset prices (notably residential property) and inflation; and iii) it looks at the role of public debt for consumer price developments. On the basis of a VAR analysis, the study finds that i) global money demand shocks affect global inflation and also global commodity prices, which in turn impact on inflation; ii) global asset/property price dynamics appear to respond to financing cost shocks, but not to shocks to global money demand. Moreover, positive house price shocks exert a significant influence on inflation. From a global perspective, the study suggests recognition of global externalities of commodities and asset values as well as the close monitoring of real estate price developments. JEL Classification: E31, E51, E62, C32, F42

Keywords: global house prices; global inflation; global money; VAR (search for similar items in EconPapers)
Date: 2012-08
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-mac, nep-mon and nep-opm
Note: 1549752
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Citations: View citations in EconPapers (6)

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Journal Article: A global perspective on inflation and propagation channels (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20121462

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