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Excess money growth and inflation dynamics

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  • Roffia, Barbara
  • Zaghini, Andrea

Abstract

The paper analyses the short-run impact of periods of strong monetary growth on inflation dynamics for 15 industrialised economies. We find that, over a 3-year horizon, the positive link between monetary aggregates and prices holds in approximately fifty percent of the cases. An econometric investigation suggests that a contemporaneous increase in the gap measures of the real stock price and real housing price and strong dynamics of loans to the private sector significantly increase the probability of turning an episode of excessive money growth into an inflationary outburst. JEL Classification: E31, E40

Suggested Citation

  • Roffia, Barbara & Zaghini, Andrea, 2007. "Excess money growth and inflation dynamics," Working Paper Series 749, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:2007749
    Note: 155132
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    References listed on IDEAS

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    More about this item

    Keywords

    inflation; money growth; quantity theory of money;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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