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Monetary facts revisited

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  • Gertler, Pavel
  • Hofmann, Boris

Abstract

This paper uses data from 46 economies over the post-war period to revisit two key monetary facts: (i) the link between money growth and inflation and (ii) the link between credit growth and financial crises. The analysis reveals that the former has weakened over time, while the latter has become stronger. This suggests that there is an inverse relationship between the two monetary facts. The money-inflation link is weak and the credit-crisis nexus is strong when inflation is low and financial systems are liberalised, while the reverse holds true in environments of high inflation and less liberalised financial systems.

Suggested Citation

  • Gertler, Pavel & Hofmann, Boris, 2018. "Monetary facts revisited," Journal of International Money and Finance, Elsevier, vol. 86(C), pages 154-170.
  • Handle: RePEc:eee:jimfin:v:86:y:2018:i:c:p:154-170
    DOI: 10.1016/j.jimonfin.2018.04.006
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    2. Raffaella Barone & Donato Masciandaro, 2017. "Crime, Money Laundering, And Credit Markets: Can Usury Exist At The Zero Lower Bound?," BAFFI CAREFIN Working Papers 1761, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
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    6. Pierre-Richard Agénor & Alessandro Flamini, 2016. "Institutional Mandates for Macroeconomic and Financial Stability," Centre for Growth and Business Cycle Research Discussion Paper Series 231, Economics, The Univeristy of Manchester.
    7. Filardo, Andrew & Genberg, Hans & Hofmann, Boris, 2016. "Monetary analysis and the global financial cycle: An Asian central bank perspective," Journal of Asian Economics, Elsevier, vol. 46(C), pages 1-16.
    8. Raffaella Barone & Donato Masciandaro, 2019. "Cryptocurrency or usury? Crime and alternative money laundering techniques," European Journal of Law and Economics, Springer, vol. 47(2), pages 233-254, April.
    9. Boris Hofmann & Gert Peersman, 2017. "Monetary Policy Transmission and Trade-offs in the United States: Old and New," CESifo Working Paper Series 6745, CESifo Group Munich.
    10. Chen, Hongyi & Funke, Michael & Tsang, Andrew, 2016. "The diffusion and dynamics of producer prices, deflationary pressure across Asian countries, and the role of China," BOFIT Discussion Papers 11/2016, Bank of Finland, Institute for Economies in Transition.
    11. Markus Pasche, 2018. "Money as an Inflationary Phenomenon," Jena Economic Research Papers 2018-011, Friedrich-Schiller-University Jena.
    12. Schnabl, Gunther, 2017. "Monetary policy and wandering overinvestment cycles in East Asia and Europe," Working Papers 148, University of Leipzig, Faculty of Economics and Management Science.
    13. Andreas Freytag & Gunther Schnabl, 2017. "Monetary Policy Crisis Management as a Threat to Economic Order," Credit and Capital Markets, Credit and Capital Markets, vol. 50(2), pages 151-169.

    More about this item

    Keywords

    Money growth; Inflation; Credit growth; Financial crises;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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