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Monetary Facts and Inflation

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  • Steve H. Hanke

Abstract

Despite recent bouts of inflation in the United States, the United Kingdom, and Europe, central bankers have been attributing the rise in inflation to various non-monetary factors, such as supply chain problems and geopolitical events. However, this article argues that excess money supply is the real culprit behind inflation, echoing the famous quote by Milton Friedman, ‘Inflation is always and everywhere a monetary phenomenon.’ The study finds a high correlation between the rate of growth of the money supply and the rate of inflation, supporting Friedman’s assertion. The author presents updated data from 147 countries spanning the period from 1990 to 2021, reaffirming the tight linkage between changes in the money supply (M2) and inflation. This evidence contradicts claims by central bankers and supports the view that inflation is primarily a result of monetary factors rather than non-monetary ones.

Suggested Citation

  • Steve H. Hanke, 2023. "Monetary Facts and Inflation," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 24(3), pages 19-26, July.
    • Handle: RePEc:wej:wldecn:901
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    File URL: https://www.worldeconomics.com/Journal/Papers/Article.details?ID=901
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