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Working Paper
Two Illustrations of the Quantity Theory of Money Reloaded
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.
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Two Illustrations of the Quantity Theory of Money Reloaded
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. If persistent changes in the monetary policy regime are accounted for, the behavior of these series maintains the close relationship predicted by standard quantity theory models. With an estimated model, we show those relationships to be relatively invariant to alternative frictions that can deliver quite different high-frequency dynamics. We also show that the low-frequency component of the data derived from statistical ...
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The Recent Rise in US Inflation: Policy Lessons from the Quantity Theory
We build a scenario for inflation in the United States in the years to come. Following Gao, Kulish, and Nicolini (2021), we use the quantity theory of money as a conceptual framework and confront the theory with evidence from both the United States and other OECD countries. We argue that a) the quantity theory of money works very well in the medium term, which we define to be close to four years; b) deviations from the inflation rate predicted by the quantity theory tend to disappear in the medium term; c) the burst in inflation that started in 2012 in the United States is a deviation from ...