NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Is Quantity Theory Still Alive?

Pedro Teles, Harald Uhlig

NBER Working Paper No. 16393
Issued in September 2010, Revised in August 2013
NBER Program(s):EFG, IFM, ME

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.

download in pdf format
   (171 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16393

Published: Pedro Teles & Harald Uhlig & João Valle e Azevedo, 2016. "Is Quantity Theory Still Alive?," The Economic Journal, vol 126(591), pages 442-464. citation courtesy of

Users who downloaded this paper also downloaded* these:
Schmitt-Grohé and Uribe w16514 Liquidity Traps: An Interest-Rate-Based Exit Strategy
Broner and Ventura w16640 Rethinking the Effects of Financial Liberalization
Stock and Watson w16488 Modeling Inflation After the Crisis
Davig, Leeper, and Walker w16495 Inflation and the Fiscal Limit
Coibion and Gorodnichenko w16537 Information Rigidity and the Expectations Formation Process: A Simple Framework and New Facts
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us