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Lessons for the central banks: Inflation in 2021-2023

Author

Listed:
  • Shibanov, O.

    (New Economic School (NES), Program "Master of Arts in Finance", Moscow, Russia)

Abstract

The world inflation in 2021-2023 was unexpectedly high - and that was the most serious global inflation episode after the oil shock of 1970th. The response of the Central banks (CB) was to increase interest rates, and by the end of 2023 inflation has hampered. Yet CBs had to accept that they made a number of errors - namely, too late start of the rate rising (in the US and EU - from the Spring of 2022), inaccurate inflation modelling, and too strong expectations of possible recession. I show how the literature thinks about the contribution of supply and demand factors into inflation in the US, EU and Russia. The speed of CB reaction to higher price increase is estimated, several steps for the CBs are valuated. The main ones - use more distinct models, react fast to the inflation processes, and do not ignore historic data that might seem outdated.

Suggested Citation

  • Shibanov, O., 2024. "Lessons for the central banks: Inflation in 2021-2023," Journal of the New Economic Association, New Economic Association, vol. 62(1), pages 240-245.
    • Handle: RePEc:nea:journl:y:2024:i:62:p:240-245
    DOI: 10.31737/22212264_2024_1_240-245
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    References listed on IDEAS

    as
    1. Melih Firat & Otso Hao, 2023. "Demand vs. Supply Decomposition of Inflation: Cross-Country Evidence with Applications," IMF Working Papers 2023/205, International Monetary Fund.
    2. Bańbura, Marta & Bobeica, Elena & Martínez Hernández, Catalina, 2023. "What drives core inflation? The role of supply shocks," Working Paper Series 2875, European Central Bank.
    3. Evgeny Pavlov, 2020. "Forecasting Inflation in Russia Using Neural Networks," Russian Journal of Money and Finance, Bank of Russia, vol. 79(1), pages 57-73, March.
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    Keywords

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    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • 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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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