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 global perspective. More specifically, we explore global aggregates covering a bro...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
University of Warsaw
2015-03-01
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| Series: | Journal of Banking and Financial Economics |
| Subjects: | |
| Online Access: | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1090&context=jbfe |
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| Summary: | 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. |
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| ISSN: | 2353-6845 |