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Inflation in the aftermath of financial crises

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  • Kaehler, Juergen
  • Weber, Christoph S.

Abstract

There has been a plethora of financial crises in the past decades. One of the main economic questions is what effects these financial crises have. Previous studies have mainly analysed the effects on GDP growth. However, there is still a gap in analysing the effect of financial crises on inflation. This study tries to fill this gap by employing a large panel data set on financial crises including countries from all over the world. The empirical analysis confirms the conjecture that banking and currency crises lead to higher inflation rates. After controlling for other causes of inflation, we find an economically and statistically significant impact of banking and currency crises on inflation. Countries that have experienced a banking or currency crisis tend to have higher inflation rates in the medium term. Furthermore, sovereign debt crises also raise inflation rates.

Suggested Citation

  • Kaehler, Juergen & Weber, Christoph S., 2023. "Inflation in the aftermath of financial crises," Economic Modelling, Elsevier, vol. 128(C).
    • Handle: RePEc:eee:ecmode:v:128:y:2023:i:c:s0264999323003243
    DOI: 10.1016/j.econmod.2023.106512
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    More about this item

    Keywords

    Banking crises; Financial crises; Inflation;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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