The Quantity Theory of Money and Friedmanian Monetary Policy: An Empirical Investigation
Claude Hillinger (),
Bernd Süssmuth and
No 3754, CESifo Working Paper Series from CESifo Group Munich
We introduce an approach for the empirical study of the quantity theory of money (QTM) that is novel both with respect to the specific steps taken as well as the general methodology employed. Empirical studies of the QTM have focused directly on the relationship between the rate of change of the money stock and inflation. We believe that this is an inferior starting point for several reasons and focus instead on the Cambridge form of the QTM. We find that the coefficient k fluctuates strongly in the short run, but has a low and steady rate of change in the long run, which makes the QTM a useful instrument for the long-run control of inflation. An important finding that contradicts all of the previous literature is that the QTM holds for low inflation as well as for high inflation. We discuss how our findings relate to monetarism generally and propose an adaption of McCallum’s rule for a Friedmanian monetary policy.
Keywords: Cambridge equation; Friedman’s k rule; monetarism; quantity theory (search for similar items in EconPapers)
JEL-codes: E31 E41 E51 E59 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
http://www.cesifo-group.de/portal/page/portal/DocB ... 3/cesifo1_wp3754.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: /RePEc:ces:ceswps:_3754
Access Statistics for this paper
More papers in CESifo Working Paper Series from CESifo Group Munich
Address: Poschingerstrasse 5, 81679 Munich
Contact information at EDIRC.
Series data maintained by Julio Saavedra ().