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OeNB Bulletin 2026/2: Detecting inflation regime shifts in the euro area: the role of money growth

Author

Listed:
  • Jannik Pointecker

    (University of Vienna)

  • Thomas Zörner

    (Oesterreichische Nationalbank (OeNB))

Abstract

This study employs an adjusted money growth indicator to identify inflation regime shifts in the euro area. A two-regime LSTAR model reveals that when adjusted M3 growth surpasses 5%, a high-inflation regime typically follows after about ten months. This regime is marked by persistent dynamics and a higher average inflation rate. The inflation surge from early 2021 to late 2022 aligns with periods of elevated adjusted money growth, underscoring the value of such indicators as complementary tools for tracking and anticipating inflation regime changes.

Suggested Citation

  • Jannik Pointecker & Thomas Zörner, 2026. "OeNB Bulletin 2026/2: Detecting inflation regime shifts in the euro area: the role of money growth," OeNB Bulletin, Oesterreichische Nationalbank (Austrian Central Bank), issue 2026/2, pages 1-23.
    • Handle: RePEc:onb:oenbbu:y:2026:i:2026/2:b:1
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    File URL: https://www.oenb.at/dam/jcr:9c83ea44-b9f5-4bbc-9bba-78084e54c738/bulletin-2026-2-detecting-inflation-regime-shifts-in-the-euro-area.pdf
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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