IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

A global perspective on inflation and propagation channels

  • Gattini, Luca
  • Pill, Huw
  • Schuknecht, Ludger

This paper revisits the evidence on the monetary policy transmission channels. It extends the existing literature along three lines: i) it takes a global perspective with aggregate series based on a broader set of countries (ca 70% per cent of the global economy) and a longer time (1960-2010) than previous studies. It, thereby, internalises potential international transmission channels (i.e. via global commodity prices); ii) it examines the interaction between monetary variables, asset prices (notably residential property) and inflation; and iii) it looks at the role of public debt for consumer price developments. On the basis of a VAR analysis, the study finds that i) global money demand shocks affect global inflation and also global commodity prices, which in turn impact on inflation; ii) global asset/property price dynamics appear to respond to financing cost shocks, but not to shocks to global money demand. Moreover, positive house price shocks exert a significant influence on inflation. From a global perspective, the study suggests recognition of global externalities of commodities and asset values as well as the close monitoring of real estate price developments. JEL Classification: E31, E51, E62, C32, F42

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1462.pdf
Download Restriction: no

Paper provided by European Central Bank in its series Working Paper Series with number 1462.

as
in new window

Length:
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:ecb:ecbwps:20121462
Contact details of provider: Postal:
60640 Frankfurt am Main, Germany

Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Michael Woodford, 1995. "Price Level Determinacy Without Control of a Monetary Aggregate," NBER Working Papers 5204, National Bureau of Economic Research, Inc.
  2. Luca ONORANTE & Gianluigi FERRUCCI & Rebeca JIMÉNEZ-RODRÍGUEZ, . "Food Price Pass-Through in the Euro Area: the Role of Asymmetries and Non-Linearities," EcoMod2010 259600125, EcoMod.
  3. Browne, Frank & Cronin, David, 2007. "Commodity prices, money and inflation," Working Paper Series 0738, European Central Bank.
  4. Matteo Ciccarelli & Benoît Mojon, 2005. "Global Inflation," Working Papers Central Bank of Chile 357, Central Bank of Chile.
  5. David Hendry & Jurgen Doornik, 2000. "Constructing Historical Euro-Zone Data," Economics Series Working Papers 4, University of Oxford, Department of Economics.
  6. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  7. Lucas, Robert E, Jr, 1980. "Two Illustrations of the Quantity Theory of Money," American Economic Review, American Economic Association, vol. 70(5), pages 1005-14, December.
  8. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1329-1368.
  9. Alvarez, Fernando & Lippi, Francesco, 2011. "Persistent Liquidity Effects and Long Run Money Demand," CEPR Discussion Papers 8650, C.E.P.R. Discussion Papers.
  10. Alessi, Lucia & Detken, Carsten, 2011. "Quasi real time early warning indicators for costly asset price boom/bust cycles: A role for global liquidity," European Journal of Political Economy, Elsevier, vol. 27(3), pages 520-533, September.
  11. D'Agostino, A & Surico, P, 2007. "Does global liquidity help to forecast US inflation?," MPRA Paper 6283, University Library of Munich, Germany.
  12. Robert B. Barsky & Lutz Kilian, 2001. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER Working Papers 8389, National Bureau of Economic Research, Inc.
  13. Sousa, Joao Miguel & Zaghini, Andrea, 2007. "Global monetary policy shocks in the G5: A SVAR approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(5), pages 403-419, December.
  14. Stephen G Cecchetti & Richhild Moessner, 2008. "Commodity prices and inflation dynamics," BIS Quarterly Review, Bank for International Settlements, December.
  15. Ball, Laurence, 2001. "Another look at long-run money demand," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 31-44, February.
  16. Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
  17. Dreger, Christian & Wolters, Jürgen, 2010. "Investigating M3 money demand in the euro area," Journal of International Money and Finance, Elsevier, vol. 29(1), pages 111-122, February.
  18. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
  19. Neil R. Ericsson, 1998. "Empirical modeling of money demand," Empirical Economics, Springer, vol. 23(3), pages 295-315.
  20. Benati, Luca, 2009. "Long run evidence on money growth and inflation," Working Paper Series 1027, European Central Bank.
  21. Canzoneri, Matthew B & Cumby, Robert & Diba, Behzad, 1998. "Is the Price Level Determined by the Needs of Fiscal Solvency?," CEPR Discussion Papers 1772, C.E.P.R. Discussion Papers.
  22. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679, December.
  23. Rasmus Ruffer & Livio Stracca, 2007. "What is global excess liquidity, and does it matter?," Money Macro and Finance (MMF) Research Group Conference 2006 120, Money Macro and Finance Research Group.
  24. Aron, Janine & Duca, John V. & Muellbauer, John N. & Murata, Keiko & Murphy, Anthony, 2010. "Credit, housing collateral and consumption: evidence from the UK, Japan and the US," Working Papers 1002, Federal Reserve Bank of Dallas.
  25. Bennett T. McCallum & Marvin S. Goodfriend, 1988. "Theoretical analysis of the demand of money," Economic Review, Federal Reserve Bank of Richmond, issue Jan, pages 16-24.
  26. Belke, Ansgar & Bordon, Ingo G. & Hendricks, Torben W., 2009. "Global Liquidity and Commodity Prices – A Cointegrated VAR Approach for OECD Countries," Ruhr Economic Papers 102, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  27. John H. Cochrane, 1998. "Long-term Debt and Optimal Policy in the Fiscal Theory of the Price Level," NBER Working Papers 6771, National Bureau of Economic Research, Inc.
  28. Kuan-Min, Wang & Yuan-Ming, Lee & T.T.Binh, Nguyen, 2008. "Asymmetric Inflation Hedge of Housing Return: A Non-linear Vector Error Correction Approach," International Real Estate Review, Asian Real Estate Society, vol. 11(1), pages 65-82.
  29. Agnello, Luca & Schuknecht, Ludger, 2011. "Booms and busts in housing markets: Determinants and implications," Journal of Housing Economics, Elsevier, vol. 20(3), pages 171-190, September.
  30. Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
  31. Claus Brand & Nuno Cassola, 2004. "A money demand system for euro area M3," Applied Economics, Taylor & Francis Journals, vol. 36(8), pages 817-838.
  32. Favero, Carlo A., 2001. "Applied Macroeconometrics," OUP Catalogue, Oxford University Press, number 9780198296850, December.
  33. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164, December.
  34. Goldfeld, Stephen M. & Sichel, Daniel E., 1990. "The demand for money," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 8, pages 299-356 Elsevier.
  35. Sims, Christopher A, 1994. "A Simple Model for Study of the Determination of the Price Level and the Interaction of Monetary and Fiscal Policy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(3), pages 381-99.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20121462. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.