International Great Inflation and Common Monetary Policy

49 Pages Posted: 11 Jul 2022

See all articles by Jacek Suda

Jacek Suda

National Bank of Poland

Anastasia Zervou

University of Texas at Austin

Date Written: May 13, 2016

Abstract

We study whether monetary authorities in the G7 countries were changing their responses to inflation in a similar manner during and following the Great Inflation era. We find that the common to the G7 countries' inflation pattern during the Great Inflation period could be associated with a common pattern in the monetary policy response to inflation: we find that until the early 1980s monetary authorities in the G7 countries responded mildly to inflation, systematically fought it throughout the 1980s and lessened again their response during the 2000s. The estimated Taylor rule coefficients on inflation are cointegrated, implying the existence of a long-run relation- ship in the responses to inflation during and after the Great Inflation period. At the same time, principal component analysis of the residuals of the estimated Taylor rules indicates that the shocks’ structure cannot account enough for the monetary policies’ comovements. We interpret these findings as suggestive of common monetary policy patterns.

Keywords: International Monetary Policy, International Great Inflation, Time Varying Parameter Model.

JEL Classification: E52, E58, C22

Suggested Citation

Suda, Jacek and Zervou, Anastasia, International Great Inflation and Common Monetary Policy (May 13, 2016). Available at SSRN: https://ssrn.com/abstract=4150296 or http://dx.doi.org/10.2139/ssrn.4150296

Jacek Suda

National Bank of Poland ( email )

00-919 Warsaw
Poland

Anastasia Zervou (Contact Author)

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

HOME PAGE: http://https://liberalarts.utexas.edu/economics/faculty/az7379

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
10
Abstract Views
59
PlumX Metrics