Is quantity theory still alive?

Pedro Teles and Harald Uhlig ()

No 1605, Working Paper Series from European Central Bank

Abstract: 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. JEL Classification: E31, E41, E42, E50

Keywords: inflation targeting; money demand; money demand elasticity; quantity theory (search for similar items in EconPapers)
Date: 2013-11
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Is Quantity Theory Still Alive? (2016)
Working Paper: Is Quantity Theory Still Alive? (2010)
Working Paper: Is Quantity Theory Still Alive? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20131605

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