Liquidity and the dynamic pattern of price adjustment: a global view

Ansgar Belke, Walter Orth and Ralph Setzer

No 2008,25, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank, Research Centre

Abstract: Global liquidity expansion has been very dynamic since 2001. Contrary to conventional wisdom, high money growth rates have not coincided with a concurrent rise in goods prices. At the same time, however, asset prices have increased sharply, significantly outpacing the subdued development in consumer prices. This paper examines the interactions between money, goods and asset prices at the global level. Using aggregated data for major OECD countries, our VAR results support the view that different price elasticities on asset and goods markets explain the recently observed relative price change between asset classes and consumer goods. --

Keywords: Global liquidity; inflation control; monetary policy transmission; asset prices (search for similar items in EconPapers)
JEL-codes: F01 E52 E31 F42 (search for similar items in EconPapers)
Date: 2008
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