Template-Type: ReDIF-Article 1.0

Author-Name: Balazs Speder 
Author-Workplace-Name: Magyar Nemzeti Bank, John Von Neumann University, University of Pecs 
Author-Email: spederb@mnb.hu
Author-Person: 

Author-Name: Balazs Vonnak 
Author-Workplace-Name: Magyar Nemzeti Bank, John Von Neumann University
Author-Email: vonnakb@mnb.hu 
Author-Person: pvo124

Title: Inflation Shocks and Disinflation: Stylised Facts from the Past 50 Years

Abstract: In our study, we examine the circumstances under which major inflation shocks lead
to persistently high inflation. For our analysis, we use macroeconomic data from
a broad sample of countries for the past fifty years or more. We identify several
cases where inflation rises from the single-digit range to above 20 per cent, followed
by successful disinflation within two years. Similarly, there are many examples where
inflation remains high after an initial shock. The former cases are characterised by
more pronounced increases in interest rates during inflation shocks, more disciplined
fiscal policy and favourable commodity price developments. Examining the same
sample, we also show that the disinflation after a period of persistently high inflation
was not typically accompanied by a significant slowdown in the real economy
and instead was often followed by higher economic growth. In the disinflationary
episodes we identified, the size of the real cost of disinflation is negatively correlated
with the central bank independence, suggesting that a disinflationary commitment
played a positive role.

Classification-JEL: E31, E63, N10
Keywords: inflation, stabilisation, monetary policy, central bank independence
Pages: 26-47
Volume: 22
Issue: 3
Year: 2023
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-22-3-st1-speder-vonnak.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:22:y:2023:i:3:p:26-47