Monetary Facts Revisited

39 Pages Posted: 7 Jun 2016

See all articles by Pavel Gertler

Pavel Gertler

National Bank of Slovakia

Boris Hofmann

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: June 2016

Abstract

This paper uses a cross-country database covering 46 economies over the post-war period to revisit two key monetary facts: (i) the long-run link between money growth and inflation and (ii) the link between credit growth and financial crises. The analysis reveals that the former has weakened over time, while the latter has become stronger. Moreover, the money-inflation nexus has been stronger in emerging market economies than in advanced economies, while it is the other way round for the link between credit growth and financial crises. These results suggest that there is an inverse relationship between the two monetary facts. The money-inflation link is weaker in regimes characterised by low inflation and highly liberalised financial systems, while the reverse holds true for the credit-crisis nexus.

Keywords: quantity theory, credit growth, financial crises

JEL Classification: E31, E42, E51, E52

Suggested Citation

Gertler, Pavel and Hofmann, Boris, Monetary Facts Revisited (June 2016). BIS Working Paper No. 566. Available at SSRN: https://ssrn.com/abstract=2789740

Pavel Gertler (Contact Author)

National Bank of Slovakia ( email )

Imricha Karvasa 1
813 25 Bratislava, 813 25
Slovakia

Boris Hofmann

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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