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

Access to Credit as a Growth Constraint

From a sample of 75,854 Slovenian fi rms in the period 1995–2011, we examine the effects of a fi rm’s access to bank credit on its growth. The results suggest that as the external fi nancing constraint relaxes and fi rm...

Deep Roots of Fiscal Behavior

This paper investigates the determinants of fiscal policy behavior and its time-varying volatility, using panel data for a broad set of advanced and emerging market economies during the period 1990–2012. The empirical re...

A global perspective on inflation and propagation channels

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 glob...

Wage-setting Behavior in France: Additional Evidence from an Ad-hoc Survey

We investigate the wage-setting behavior of French companies using an ad-hoc survey specifically conducted for this study. Our main results are the following. i) Wages are changed infrequently. 75% of firms change their...

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...

Download PDF file
  • EP ID EP344483
  • DOI 10.7172/2353-6845.jbfe.2015.1.3
  • Views 97
  • Downloads 0

How To Cite

Luca Gattini, Huw Pill, Ludger Schuknecht (2015). A global perspective on inflation and propagation channels. Journal of Banking and Financial Economics, 1(3), 50-76. https://europub.co.uk/articles/-A-344483