Inflation and policy coordination in high-inflation environments
Idris A. Adediran,
Olajide O. Oyadeyi and
Tirimisiyu F. Oloko
Journal of Policy Modeling, 2025, vol. 47, issue 5, 889-902
Abstract:
We observe a disquieting problem: the ineffectiveness of conventional monetary policy instruments, including inflation targeting, to deliver price stability in high-inflation environments. We explore two exciting contributions using an intuitive panel data econometric modelling across M1 2010 and M12 2023. First, we highlight the key drivers of inflation in the countries as mostly non-monetary factors–geopolitical risk, fiscal spending, and inflation expectation–to explain why price stability eludes the monetary authorities. Second, we estimate monetary and fiscal policy rules and find that while price stability remains the overarching goal of monetary policy, the fiscal authorities appear unconcerned despite contributing to the problem. We propose a policy coordination strategy that integrates inflation targeting into both monetary and fiscal policy rules, as well as supply-side initiatives.
Keywords: High inflation environment; Inflation targeting; Policy coordination; Econometric modelling (search for similar items in EconPapers)
JEL-codes: C23 E31 E52 E61 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:47:y:2025:i:5:p:889-902
DOI: 10.1016/j.jpolmod.2025.05.002
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