A global perspective on inflation and propagation channels
Journal Title: Journal of Banking and Financial Economics - Year 2015, Vol 1, Issue 3
Abstract
This paper revisits the evidence on monetary policy transmission. It extends the existing literature in three dimensions. First, we attempt to internalise potential international channels of transmission by taking a global perspective. More specifically, we explore global aggregates covering a broader set of countries (ca. 70% per cent of the world economy) and a longer time span (from 1960 to 2013) than previous studies. Second, we broaden the set of transmission channels considered, notably by exploring interactions among monetary variables, inflation and asset prices (including residential property prices). Third, we look at the potential role of public debt in driving price developments, on the grounds underpinned by fiscal theories of the price level. On the basis of a VAR analysis, we find that: (1) global money demand shocks affect global inflation and global commodity prices (which, in turn, impact on inflation); (2) global asset price dynamics respond to financing cost shocks and (very modestly) to shocks to global money demand; and (3) positive house price shocks exert a significant influence on inflation. From a global perspective, the study suggests that an understanding of inflation requires recognition of the externalities that global commodity and asset price developments exert over domestic inflation.
Authors and Affiliations
Luca Gattini, Huw Pill, Ludger Schuknecht
Keywords
Related Articles
- EP ID EP344483
- DOI 10.7172/2353-6845.jbfe.2015.1.3
- Views 93
- Downloads 0
The European system of financial supervision – regulatory impact assessment
Complexity and uncertainty in the application of the regulations of the European system of financial supervision are due to the fact that its particular elements were implemented over a period of time. First, it was a sy...
The Role of Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework for FDI Spillovers
A vast set of empirical evidence has been amassed over the past decade on the existence and direction of foreign direct investment (FDI)-generated horizontal and vertical spillovers. Overall, the results are mixed, and s...
Macroprudential Policy Effectiveness: Lessons from Southeastern Europe
This paper presents a detailed account of the rich set of macroprudential measures (MPPs) implemented in Bulgaria, Croatia, Romania, and Serbia during their synchronized boom and bust cycles in 2002–12, and assesses thei...
Determinants of Banks’ Net Interest Margins in Honduras
This paper analyzes the determinants of banks’ net interest margins in Honduras during the years 1998 to 2013 – a period characterized by increasing banks’ net interest margins, foreign bank participation and consolidati...
The Effect of the Introduction of a “Pay Per Use“ Option within Motor TPL Insurance
In this paper the effects of the introduction of the so called “pay per use” -insurance products are examined. These products collect data of mileage of kilometers driven by policy holders. As a result of this data, poli...