IDEAS home Printed from https://ideas.repec.org/p/ris/jhisae/0180.html
   My bibliography  Save this paper

Will the Pandemic Bulge in Money Cause High Inflation?

Author

Listed:
  • Hetzel, Robert

    (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)

Abstract

The monetary aggregate M2 increased from $15,473 billion in February 2020 to $19,670 billion in February 2021, or by 27.1%. Real M2 (M2 deflated by the CPI) increased similarly by 25.3% (https://fred.stlouisfed.org/series/M2REAL). This monetary acceleration, unprecedented outside of wartime, is apparent in a longer-run perspective. From the trough of the last business cycle in June 2009 through February 2020, annualized monthly growth rates for M2 averaged 5.9%. Over the interval March 2020 through June 2020, they averaged 65.6%. Although diminished, rapid M2 growth continued, averaging 12.9% from July 2020 through March 2021. Milton Friedman famously said that inflation is always and everywhere a monetary phenomenon. If he is right, should not this bulge in money lead to an undesirably high rate of inflation?

Suggested Citation

  • Hetzel, Robert, 2021. "Will the Pandemic Bulge in Money Cause High Inflation?," Studies in Applied Economics 180, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    • Handle: RePEc:ris:jhisae:0180
    as

    Download full text from publisher

    File URL: https://sites.krieger.jhu.edu/iae/files/2021/05/Will-the-Pandemic-Bulge-in-Money-Cause-High-Inflation-5-3-21.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jacob Viner, 1950. "Full Employment at Whatever Cost," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 64(3), pages 385-407.
    2. Orphanides, Athanasios, 2003. "The quest for prosperity without inflation," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 633-663, April.
    3. Olivier Blanchard & Jordi Galí, 2007. "Real Wage Rigidities and the New Keynesian Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 35-65, February.
    4. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    5. Aoki, Kosuke, 2001. "Optimal monetary policy responses to relative-price changes," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 55-80, August.
    6. Franco Modigliani & Lucas Papademos, 1975. "Targets for Monetary Policy in the Coming Year," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1), pages 141-166.
    7. Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 3-10, Winter.
    8. Hetzel,Robert L., 2008. "The Monetary Policy of the Federal Reserve," Cambridge Books, Cambridge University Press, number 9780521881326.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert G. King, 2008. "The Phillips curve and U.S. macroeconomic policy : snapshots, 1958-1996," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 94(Fall), pages 311-359.
    2. Aurélien Goutsmedt, 2021. "From the Stagflation to the Great Inflation: Explaining the US economy of the 1970s," Revue d'économie politique, Dalloz, vol. 131(3), pages 557-582.
    3. Bozani, Vasiliki & Drydakis, Nick, 2011. "Studying the NAIRU and its Implications," IZA Discussion Papers 6079, Institute of Labor Economics (IZA).
    4. Robert L. Hetzel, 2016. "What Caused the Great Recession in the Eurozone?," Working Paper 16-10, Federal Reserve Bank of Richmond.
    5. Vasiliki Bozani, 2011. "NAIRU, Unemployment and Post Keynesian Economics," Working Papers 1104, University of Crete, Department of Economics.
    6. Giraud, Gaël & Grasselli, Matheus, 2021. "Household debt: The missing link between inequality and secular stagnation," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 901-927.
    7. Rancan, Antonella, 2022. "The "place of the Phillips curve" in macroeconometric models: The case of the first Federal Reserve Board's model (1966-1980s)," Economics & Statistics Discussion Papers esdp22080, University of Molise, Department of Economics.
    8. Rancan, Antonella, 2021. "The “Place Of The Phillips Curve” in Macroeconometric Models: The Case of the First Federal Reserve Board’s Model (1966-1980s)," OSF Preprints t5jrx, Center for Open Science.
    9. Valerija Botric, 2012. "NAIRU estimates for Croatia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 30(1), pages 163-180.
    10. Donayre, Luiggi & Panovska, Irina, 2016. "Nonlinearities in the U.S. wage Phillips curve," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 19-43.
    11. Israel, Karl-Friedrich, 2017. "In the long run we are all unemployed?," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 67-81.
    12. Robert L. Hetzel, 2015. "What is the Monetary Standard," Working Paper 15-16, Federal Reserve Bank of Richmond.
    13. Robert L. Hetzel, 2017. "What Remains of Milton Friedman's Monetarism?," Working Paper 17-9, Federal Reserve Bank of Richmond.
    14. Michael Bordo & Barry Eichengreen, 2013. "Bretton Woods and the Great Inflation," NBER Chapters, in: The Great Inflation: The Rebirth of Modern Central Banking, pages 449-489, National Bureau of Economic Research, Inc.
    15. George S. Tavlas, 2015. "In Old Chicago: Simons, Friedman, and the Development of Monetary‐Policy Rules," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(1), pages 99-121, February.
    16. Bennett T. McCallum & Edward Nelson, 2004. "Timeless perspective vs. discretionary monetary policy in forward-looking models," Review, Federal Reserve Bank of St. Louis, vol. 86(Mar), pages 43-56.
    17. Jordi Galí & Frank Smets & Rafael Wouters, 2012. "Unemployment in an Estimated New Keynesian Model," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 329-360.
    18. Hetzel, Robert, 2020. "COVID-19 and the Fed’s Monetary Policy," Working Papers 10839, George Mason University, Mercatus Center.
    19. Aleksejs Meļihovs & Anna Zasova, 2009. "Assessment of the natural rate of unemployment and capacity utilisation in Latvia," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 9(2), pages 25-46, December.
    20. Aurélien Goutsmedt & Goulven Rubin, 2018. "Robert J. Gordon and the introduction of the natural rate hypothesis in the Keynesian framework," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01821825, HAL.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:jhisae:0180. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Steve H. Hanke (email available below). General contact details of provider: https://edirc.repec.org/data/iaejhus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.