High credit growth rarely causes inflation when directed to productive investment

Evidence

Money creation is often blamed for generating inflation, especially in developing countries. In principle, the risk of inflation does not exist so long as credit is allocated to productive investments that aim to increase the local productive capacity and reduce the under-utilisation of the workforce. Empirical studies have shown that episodes of high credit growth have rarely led to high inflation; or rather, that inflationary episodes have rarely been preceded by an increase in the money supply. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 145

Categorization

• corroborated: 3 independent passages support this claim — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 145
• XREF: connects to: Reformers demand flexible exchange rates and growth-oriented central bank policy; Banks create money out of thin air when granting loans rather than lending savings; Banks create money ex nihilo, so credit not savings finances investment — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 139

Related

• Banks create money ex nihilo, so credit not savings finances investment (similarity 0.84)
• Reformers demand flexible exchange rates and growth-oriented central bank policy (similarity 0.83)
• Banks create money out of thin air when granting loans rather than lending savings (similarity 0.82)
• Scarcity of savings stems from scarcity of loans, not vice versa (similarity 0.80)

Broader Connections

• Banks create money ex nihilo, so credit not savings finances investment #corroborates (0.60) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 139