Is quantity theory still alive?

Arbeitspapier

This paper investigates whether the quantity theory of money is still alive. We demonstrate three insights. First, for countries with low inflation, the raw relationship between average inflation and the growth rate of money is tenuous at best. Second, the fit markedly improves, when correcting for variation in output growth and the opportunity cost of money, using elasticities implied by theories of Baumol-Tobin and Miller-Orr. Finally, the sample after 1990 shows considerably less inflation variability, worsening the fit of a one-for-one relationship between money growth and inflation, and generates a fairly low elasticity of money demand.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1605

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Demand for Money ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Monetary Policy, Central Banking, and the Supply of Money and Credit: General
• Subject: inflation targeting ; money demand ; money demand elasticity ; quantity theory ; Geldtheorie ; Quantitätstheorie ; Inflation ; Inflationssteuerung ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Teles, Pedro ; Uhlig, Harald
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/154038
• Last update: 10.03.2025, 11:43 AM CET