Two Illustrations of the Quantity Theory of Money Reloaded
Abstract: In this paper, we review the relationship between inflation rates, nominal interest rates, and rates of growth of monetary aggregates for a large group of OECD countries. We conclude that the low-frequency behavior of these series maintains a close relationship, as predicted by standard quantity theory models. In an estimated model, we show those relationships to be relatively invariant to alternative frictions that can deliver very different high-frequency dynamics. We argue that these relationships are useful for policy design aimed at controlling inflation.
File(s): File format is application/pdf https://www.minneapolisfed.org/research/wp/wp774.pdf
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Working Papers
Publication Date: 2020-12-15