Is Inflation Always and Everywhere a Monetary Phenomenon?

Using a sample of about 160 countries over the last 30 years, we test for the quantity theory relationship between money and inflation. When analysing the full sample of countries, we find a strong positive relation between long-run inflation and the money growth rate. The relation is not proportion...

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Bibliographic Details
Published in:The Scandinavian journal of economics 2005-06, Vol.107 (2), p.239-259
Main Authors: Grauwe, Paul De, Polan, Magdalena
Format: Article
Language:English
Subjects:
Aggregation
Business cycles
Comparative analysis
Correlation analysis
Data analysis
E40
E50
Economic conditions
Economic growth models
Economic growth rate
Economic growth theories
Economic inflation
Economic models
Economic theory
Empirical research
Growth rate
Inflation
Inflation rate
Inflation rates
Manycountries
Mathematical constants
Monetary economics
Monetary growth
Monetary models
Money
Money supply
P values
quantity theory of money
Studies
Velocity of money
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Summary:Using a sample of about 160 countries over the last 30 years, we test for the quantity theory relationship between money and inflation. When analysing the full sample of countries, we find a strong positive relation between long-run inflation and the money growth rate. The relation is not proportional, however. The strong link between inflation and money growth is almost wholly due to the presence of high- (or hyper-) inflation countries in the sample. The relationship between inflation and money growth for low-inflation countries (on average less than 10% per annum over the last 30 years) is weak.
ISSN:0347-0520
1467-9442
1467-9442
DOI:10.1111/j.1467-9442.2005.00406.x