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Excess money growth and inflation dynamics

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Author Info
Barbara Roffia () (European Central Bank, Directorate General Economics, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Andrea Zaghini () (Banca d’Italia, Economic Research Department, Via Nazionale 91, 00184 Rome, Italy.)

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Abstract

The paper analyses the short-run impact of periods of strong monetary growth on inflation dynamics for 15 industrialised economies. We find that, over a 3-year horizon, the positive link between monetary aggregates and prices holds in approximately fifty percent of the cases. An econometric investigation suggests that a contemporaneous increase in the gap measures of the real stock price and real housing price and strong dynamics of loans to the private sector significantly increase the probability of turning an episode of excessive money growth into an inflationary outburst. JEL Classification: E31, E40.

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Paper provided by European Central Bank in its series Working Paper Series with number 749.

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Length: 40 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:ecb:ecbwps:20070749

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Related research
Keywords: Inflation money growth quantity theory of money.

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Barbara Roffia & Andrea Zaghini, 2007. "Excess money growth and inflation dynamics," Working Paper Series 749, European Central Bank. [Downloadable!]
    Other versions:
  2. Christoffer Kok Sørensen & Jung-Duk Lichtenberger, 2007. "Mortage interest rate dispersion in the euro area," Working Paper Series 733, European Central Bank. [Downloadable!]
  3. Simone Manganelli & Guido Wolswijk, 2007. "Market discipline, financial integration and fiscal rules - what drives spreads in the euro area government bond market?," Working Paper Series 745, European Central Bank. [Downloadable!]
  4. Smets, Frank & Wouters, Rafael, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," CEPR Discussion Papers 6112, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Luca Benati & Haroon Mumtaz, 2007. "U.S. evolving macroeconomic dynamics - a structural investigation," Working Paper Series 746, European Central Bank. [Downloadable!]
  6. Riccardo Calcagno & Florian Heider, 2007. "Market based compensation, price informativeness and short-term trading," Working Paper Series 735, European Central Bank. [Downloadable!]
  7. Dieter Gerdesmeier & Francesco Paolo Mongelli & Barbara Roffia, 2007. "The Eurosystem, the US Federal Reserve and the Bank of Japan - similarities and differences," Working Paper Series 742, European Central Bank. [Downloadable!]
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  8. Henrique S. Basso & Oscar Calvo-Gonzalez & Marius Jurgilas, 2007. "Financial dollarization - the role of banks and interest rates," Working Paper Series 748, European Central Bank. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Giovanni Lombardo & David Vestin, 2007. "Welfare implications of Calvo vs. Rotemberg pricing assumptions," Working Paper Series 770, European Central Bank. [Downloadable!]
  2. Joao Miguel Sousa & Andrea Zaghini, 2007. "Global Monetary Policy Shocks in the G5: a SVAR Approach," CEIS Research Paper 89, Tor Vergata University, CEIS. [Downloadable!]
    Other versions:
  3. Antje Berndt & Iulian Obreja, 2007. "The pricing of risk in European credit and corporate bond markets," Working Paper Series 805, European Central Bank. [Downloadable!]
  4. Jiri Podpiera, 2007. "Policy rate decisions and unbiased parameter estimation in typical monetary policy rules," Working Paper Series 771, European Central Bank. [Downloadable!]
  5. Barbara Roffia & Andrea Zaghini, 2007. "Excess money growth and inflation dynamics," Working Paper Series 749, European Central Bank. [Downloadable!]
    Other versions:
  6. Jukka Jalava & Ilja Kristian Kavonius, 2007. "Durable goods and their effect on household saving rations in the euro area," Working Paper Series 755, European Central Bank. [Downloadable!]
  7. Philipp Engler & Michael Fidora & Christian Thimann, 2007. "External imbalances and the US current account - how supply-side changes affect an exchange rate adjustment," Working Paper Series 761, European Central Bank. [Downloadable!]
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