The quantity theory of money: An empirical analysis for 1870 - 2020

Alexander Jung

Journal of Macroeconomics, 2025, vol. 85, issue C

Abstract: This study revisits the Quantity Theory of Money (QTM) by examining the relationship between excess money growth and inflation over 150 years (1870–2020) in 18 industrialized countries. Utilizing the Jordà-Schularick-Taylor Macrohistory Database and advanced econometric techniques, the research uncovers that the strength of this long-run relationship has varied across time and different monetary regimes: it was weak during the classical gold standard and the recent age of inflation targeting, whereas it was strong after World War I and before the Great Moderation. The money-inflation link has been very reliable in high-inflation regimes but was unreliable in low-inflation environments. The empirical analysis also confirms long and variable lags in the transmission of monetary impulses to inflation, with excess money growth impacting inflation after 2 to 2½ years.

Keywords: Money growth; Inflation; Monetary regimes; Payment technologies; Panel cointegration; Local projections (search for similar items in EconPapers)
JEL-codes: B16 B23 C33 E40 E50 N1 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:85:y:2025:i:c:s0164070425000187

DOI: 10.1016/j.jmacro.2025.103681

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