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Money supply and inflation in Europe: Is there still a connection?

Author

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  • Diermeier, Matthias
  • Goecke, Henry

Abstract

Since the outbreak of the European financial and economic crisis in 2008, the monetary policy of the European Central Bank (ECB) has been in crisis mode. The central bankers are attempting to get a grasp on the current low inflation rates and inflation expectations by, among other things, introducing a policy of extreme quantitative easing. The expansion of the Eurosystem's balance sheet was problem-free on this occasion, and the ECB also managed to eventually increase the money supply again. However, ensuring that the growth in the money supply transmutes into higher inflation or inflation expectations has been much more difficult. [...]

Suggested Citation

  • Diermeier, Matthias & Goecke, Henry, 2016. "Money supply and inflation in Europe: Is there still a connection?," IW policy papers 17/2016E, Institut der deutschen Wirtschaft (IW) / German Economic Institute.
    • Handle: RePEc:zbw:iwkpps:172016e
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    References listed on IDEAS

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    1. Saten Kumar & Hassan Afrouzi & Olivier Coibion & Yuriy Gorodnichenko, 2015. "Inflation Targeting Does Not Anchor Inflation Expectations: Evidence from Firms in New Zealand," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 151-225.
    2. Hüther, Michael & Demary, Markus, 2015. "IW monetary outlook December 2015: Weak credit growth hinders eurozone inflation to increase," IW policy papers 37/2015, Institut der deutschen Wirtschaft (IW) / German Economic Institute.
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    5. Grégory Claeys & Alvaro Leandro, 2016. "The European Central Bank’s quantitative easing programme- limits and risks," Policy Contributions 12814, Bruegel.
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    Cited by:

    1. Nair Sultana & Rabiunnesa Koli & Mahamuda Firoj, 2019. "Causal Relationship of Money Supply and Inflation: A Study of Bangladesh," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(1), pages 42-51, January.

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    More about this item

    JEL classification:

    • 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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