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Assessing Potential Inflation Consequences of QE after Financial Crises

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  • Samuel Reynard

    ()
    (Peterson Institute for International Economics)

Abstract

Financial 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 Info

Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP12-22.

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Date of creation: Nov 2012
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Handle: RePEc:iie:wpaper:wp12-22

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Related research

Keywords: Financial crises; inflation; monetary aggregates; quantitative easing;

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References

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  1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," NBER Working Papers 14656, National Bureau of Economic Research, Inc.
  2. Samuel Reynard, 2006. "Money and the Great Disinflation," Working Papers 2006-07, Swiss National Bank.
  3. Nelson, Edward, 2003. "The Future of Monetary Aggregates in Monetary Policy Analysis," CEPR Discussion Papers 3897, C.E.P.R. Discussion Papers.
  4. Bennett T. McCallum, 1987. "Inflation: Theory and Evidence," NBER Working Papers 2312, National Bureau of Economic Research, Inc.
  5. Samuel Reynard, 2007. "Maintaining Low Inflation: Money, Interest Rates, and Policy Stance," Working Papers 2007-05, Swiss National Bank.
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Cited by:
  1. Boris Hofmann & Feng Zhu, 2013. "Central bank asset purchases and inflation expectations," BIS Quarterly Review, Bank for International Settlements, March.

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