Exchange Rates, Prices and Money: A Long-Run Perspective

Paul De Grauwe and Marianna Grimaldi

International Journal of Finance & Economics, 2001, vol. 6, issue 4, 289-313

Abstract: In this paper we analyse the long-run proportionality and neutrality propositions between inflation and money growth and between exchange rate changes and money growth. Using a sample of 100 countries over a thirty-year period we find that the evidence in favour of these propositions is weak for the low inflation countries and very strong for the high inflation countries. We propose an explanation based on productivity shocks and transaction costs. Copyright @ 2001 by John Wiley & Sons, Ltd. All rights reserved.

Date: 2001
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