The Long-Run Link between Money Growth and Inflation

William Crowder

Economic Inquiry, 1998, vol. 36, issue 2, 229-43

Abstract: Is inflation always a monetary phenomenon? Many economists believe that the link between money growth and inflation in the United States has weakened over the last two decades due in part to the Federal Reserve's policy experiment in 1979-82 and innovations in the financial sector of the economy. The author finds that the long-run relationship between money growth and inflation is strong in a statistical sense and important economically. The key result is that the trend or growth component in CPI inflation is entirely due to the trend component of monetary base growth. Copyright 1998 by Oxford University Press.

Date: 1998
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