Assessing Potential Inflation Consequences of QE after Financial Crises
AbstractFinancial crises have been followed by different inflation paths which are related to monetary policy and money creation by the banking sector during those crises. Accounting for equilibrium changes and non-linearity issues, the empirical relationship between money and subsequent inflation developments has remained stable and similar in crisis and normal times. This analysis can explain why the financial crisis in Argentina in the early 2000s was followed by increasing inflation, whereas Japan experienced deflation in the 1990s and 2000s despite quantitative easing. Current quantitative easing policies should lead to increasing and persistent inflation over the next years.
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Bibliographic InfoPaper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP12-22.
Date of creation: Nov 2012
Date of revision:
Financial crises; inflation; monetary aggregates; quantitative easing;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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