EconPapers    
Economics at your fingertips  
 

International Historical Evidence on Money Growth and Inflation: The Role of High Inflation Episodes

Michele Fratianni (), Marco Gallegati () and Federico Giri ()

The B.E. Journal of Macroeconomics, 2021, vol. 21, issue 2, 541-564

Abstract: How long is the long run in the relationship between money growth and inflation? How important are high inflation episodes for the unit slope finding in the quantity theory of money? To answer these questions, we study the relationship between excess money growth and inflation over time and across frequencies using annual data from 1870 to 2013 for 16 developed countries. Wavelet-based exploratory analysis shows the existence of a close stable relationship between excess money growth and inflation only over long time horizons, i.e. periods greater than 16–24 years, with money growth mostly leading. When we investigate the sensitivity of the unit slope finding to inflation episodes using a “time-frequency-based” panel data approach, we find that low-frequency regression coefficients estimated over variable-length subsamples are largely affected by high inflation episodes occurring in the 1910s, the 1940s, and the 1970s. Taken together, our results suggest that inflationary upsurges affect regression coefficients, but not the closeness of the long-run relationship. This reconciles the validity of the quantity theory of money with the current disinterest of monetary policymaking in money growth.

Keywords: quantity theory of money; time-frequency analysis; low frequency relationships; high inflation episodes (search for similar items in EconPapers)
JEL-codes: C22 E40 E50 N10 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1515/bejm-2019-0183 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:21:y:2021:i:2:p:541-564:n:6

Ordering information: This journal article can be ordered from
https://www.degruyter.com/view/j/bejm

DOI: 10.1515/bejm-2019-0183

Access Statistics for this article

The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti

More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().

 
Page updated 2023-01-29
Handle: RePEc:bpj:bejmac:v:21:y:2021:i:2:p:541-564:n:6