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Inflation and policy coordination in high-inflation environments

Author

Listed:
  • Adediran, Idris A.
  • Oyadeyi, Olajide O.
  • Oloko, Tirimisiyu F.

Abstract

We observe a disquieting problem: the ineffectiveness of conventional monetary policy instruments, including inflation targeting, to deliver price stability in high-inflation environments. We explore two exciting contributions using an intuitive panel data econometric modelling across M1 2010 and M12 2023. First, we highlight the key drivers of inflation in the countries as mostly non-monetary factors–geopolitical risk, fiscal spending, and inflation expectation–to explain why price stability eludes the monetary authorities. Second, we estimate monetary and fiscal policy rules and find that while price stability remains the overarching goal of monetary policy, the fiscal authorities appear unconcerned despite contributing to the problem. We propose a policy coordination strategy that integrates inflation targeting into both monetary and fiscal policy rules, as well as supply-side initiatives.

Suggested Citation

  • Adediran, Idris A. & Oyadeyi, Olajide O. & Oloko, Tirimisiyu F., 2025. "Inflation and policy coordination in high-inflation environments," Journal of Policy Modeling, Elsevier, vol. 47(5), pages 889-902.
    • Handle: RePEc:eee:jpolmo:v:47:y:2025:i:5:p:889-902
    DOI: 10.1016/j.jpolmod.2025.05.002
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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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