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Global liquidity, money growth and UK inflation

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  • Ellington, Michael
  • Milas, Costas

Abstract

This paper uses tools from the classical theory of inflation for UK Consumer Price Inflation from 1970Q1 to 2017Q4. In particular, we adopt augmented Phillips curve type equations within a linear and regime-switching framework where regimes are governed by previous inflation rates. Our non-linear models show that a monetary explanation of inflation is prominent during periods of high inflation. However our models imply that during periods of high inflation, The Bank of England should monitor monetary conditions in conjunction with monetary policy stance; as these can help dampen inflation persistence.

Suggested Citation

  • Ellington, Michael & Milas, Costas, 2019. "Global liquidity, money growth and UK inflation," Journal of Financial Stability, Elsevier, vol. 42(C), pages 67-74.
  • Handle: RePEc:eee:finsta:v:42:y:2019:i:c:p:67-74
    DOI: 10.1016/j.jfs.2019.05.012
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    More about this item

    Keywords

    Global liquidity; Inflation; Divisia money; Non-linear model;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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