Is Quantity Theory Still Alive?

Pedro Teles and Harald Uhlig ()

No 8049, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper investigates whether the quantity theory of money is still alive. We demonstrate three insights. First, for countries with low inflation, the raw relationship between average inflation and the growth rate of money is tenuous at best. Second, the fit markedly improves, when correcting for variation in output growth and the opportunity cost of money, using elasticities implied by theories of Baumol-Tobin and Miller-Orr. Finally, the sample after 1990 shows considerably less inflation variability, worsening the fit of a one-for-one relationship between money growth and inflation, and generates a fairly low elasticity of money demand.

Keywords: inflation; Money demand; Quantity theory of money (search for similar items in EconPapers)
JEL-codes: E31 E40 E41 E52 (search for similar items in EconPapers)
Date: 2010-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Is Quantity Theory Still Alive? (2016)
Working Paper: Is quantity theory still alive? (2013)
Working Paper: Is Quantity Theory Still Alive? (2010)
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