Excess Money Growth and Inflation Dynamics

46 Pages Posted: 31 May 2007

See all articles by Barbara Roffia

Barbara Roffia

European Central Bank (ECB)

Andrea Zaghini

Bank of Italy

Multiple version iconThere are 2 versions of this paper

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

Roffia, Barbara and Zaghini, Andrea, Excess Money Growth and Inflation Dynamics (January 1, 2008). ECB Working Paper No. 749, Bank of Italy Temi di Discussione (Working Paper) No. 657, Available at SSRN: https://ssrn.com/abstract=983548 or http://dx.doi.org/10.2139/ssrn.983548

Barbara Roffia (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Andrea Zaghini

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

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