How effective were policies and institutions in influencing inflation? New global evidence from the pandemic

Abstract

The objective of this paper is to examine the role of policies and institutions in shaping inflation during the pandemic for a global sample of 106 countries. Our analysis unravels new evidence: central banks contribute to developing countries’ inflation but curb ASEAN inflation. Financial authorities reduce advanced economies’ inflation but boost ASEAN’s. Policies favouring non-financial businesses aid developing, advanced, and EURO economies, while those aiding individuals alleviate inflation in developing and ASEAN nations. Policy tools of grants, payments, and lending reduce inflation in developing, EURO, and ASEAN economies, respectively. Conversely, announcements and rules elevate inflation in developing countries. Overall, central banks and financial authorities wield substantial influence institutionally, while policies targeting non-financial businesses and individuals effectively combat inflation. Varied policy tools demonstrate nuanced effectiveness across different economies, highlighting the complexity of inflation management strategies.