Excess money growth and inflation dynamics

Barbara Roffia () and Andrea Zaghini ()
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Barbara Roffia: European Central Bank, DG Economics

No 657, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research Department

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 (search for similar items in EconPapers)
JEL-codes: E31 E40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: Written 2008-01

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Related works:
Working Paper: Excess money growth and inflation dynamics (2007)
Journal Article: Excess Money Growth and Inflation Dynamics* (2007)
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