IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Money and Inflation: Where do we Stand?

  • Jose de Gregorio R.

This article analyzes the rapid growth of money (M1A) in the Chilean economy, that has coincided with low inflation and a loosened monetary policy. This has been advocated to assert that such monetary growth is inconsistent with the inflation target. This work is intended to prove such an argument wrong. First, episodes occurred in other lower-inflation countries are presented, where monetary aggregates have grown even faster than in Chile, without resulting in higher inflation. Second, money trends are shown to be consistent with money demand estimates, although these are very volatile. Finally, the paper explains why in the context of a monetary policy based on inflation targeting, where the policy instrument is the interest rate, it is possible for money to fluctuate widely without jeopardizing the inflation target. Even if inflation is associated to an excessive increase in the amount of money, and monetary policy is neutral over the long term, monetary aggregates provide little information on inflationary pressures.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bcentral.cl/estudios/revista-economia/2003/abr/02_DeGregorio.pdf
Download Restriction: no

Article provided by Central Bank of Chile in its journal Economía Chilena.

Volume (Year): 6 (2003)
Issue (Month): 1 (April)
Pages: 5-19

as
in new window

Handle: RePEc:chb:bcchec:v:6:y:2003:i:1:p:5-19
Contact details of provider: Postal: Casilla No967, Santiago
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page: http://www.bcentral.cl/

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. William Poole, 1970. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Staff Studies 57, Board of Governors of the Federal Reserve System (U.S.).
  2. De Grauwe, Paul & Polan, Magdalena, 2001. "Is Inflation Always and Everywhere a Monetary Phenomenon?," CEPR Discussion Papers 2841, C.E.P.R. Discussion Papers.
  3. Gerlach, Stefan & Svensson, Lars E O, 2002. "Money and Inflation in the Euro-Area: A Case for Monetary Indicators?," CEPR Discussion Papers 3392, C.E.P.R. Discussion Papers.
  4. W A Razzak, 2001. "Money in the era of inflation targeting," Reserve Bank of New Zealand Discussion Paper Series DP2001/02, Reserve Bank of New Zealand.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:chb:bcchec:v:6:y:2003:i:1:p:5-19. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Sepulveda)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.