engleski

Unconventional monetary policy at a time of COVID-19 crisis - is the inflation monster awakened?

With the beginning of the COVID-19 crisis, the monetary authorities recognized their responsibility to react as fast as possible and to do “whatever it takes” to keep the economic activity and business alive. Under the conditions of near-zero interest rate boundary, the only choice was to bring the unconventional monetary policy (UMP) back on stage once again. This paper systematically analyses the UMP tools employed to boost the economy and arises the question of whether these policies would trigger inflation. The monthly data of money supply (M1) and harmonised index of consumer prices (HICP) for period 2019m1 to 2021m5 for Croatia, Euro area and the US were used in econometric analysis. To determine the relationship between prices and quantity of money the Granger causality tests were employed. The main conclusion is that today non-monetary factors are the main drivers for inflation but fast recovery and inflation threats will probably evoke the tapering measures sooner than it was announced by the monetary authorities.

unconventional monetary policy ; COVID-19 crisis ; inflation ; tapering

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