Excess Money Growth and Inflation Dynamics
46 Pages Posted: 31 May 2007
Date Written: January 1, 2008
The paper analyses the short-run impact of periods of strong monetary growth on inflation dynamics for 15 industrialised economies. We find that when robust money growth is accompanied by large increases in stock and house prices and loose credit conditions, the probability of recording an inflationary outburst over a three-year horizon is significantly increased. In contrast, significant money stock expansions which are not associated with sustained credit increases and strong dynamics in other asset prices seem to be less likely to have inflationary consequences and thus, less worrying from a policy perspective.
Keywords: Inflation, money growth, quantity theory of money
JEL Classification: E31, E40
Suggested Citation: Suggested Citation