Money and Inflation

Ansgar Belke and Thorsten Polleit ()

No 284/2007, Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim from Department of Economics, University of Hohenheim, Germany

Abstract: We turn our attention to the role of money for determining nominal magnitudes. Using US data, we find that the aggregate “nominal output plus and stock market capitalisation” is closely related to the money stock, lending support to one of Milton Friedman’s key monetarist propositions. This finding should be particularly important for ECB monetary policy: an inflation-free euro plays a crucial role for European economic and political integration. We conclude that monetary policy must keep a very close eye on money supply if it wants to prevent consumer and asset price inflation.

JEL-codes: C22 E52 G12 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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