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On monetary growth and inflation in leading economies, 2021–22: Relative prices and the overall price level

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  • John Greenwood
  • Steve H Hanke

Abstract

For most of the period since China started to reform and open its economy, falling goods prices in developed economies have been offset by rising service prices, but as a result of the COVID‐19 pandemic these relative price trends have been temporarily reversed. Separately from these relative price changes, the 2021–22 episode of inflation reflects broad money growth rates in many economies around the world since the start of the pandemic. The economies that are predicted to experience the greatest increase in inflation are those where monetary growth has increased most relative to the requirements to finance normal economic growth and the normal increase in demand for money balances (the inverse of income velocity).

Suggested Citation

  • John Greenwood & Steve H Hanke, 2022. "On monetary growth and inflation in leading economies, 2021–22: Relative prices and the overall price level," Economic Affairs, Wiley Blackwell, vol. 42(2), pages 288-306, June.
    • Handle: RePEc:bla:ecaffa:v:42:y:2022:i:2:p:288-306
    DOI: 10.1111/ecaf.12536
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    References listed on IDEAS

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    1. Milton Friedman, 1961. "The Lag in Effect of Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 69(5), pages 447-447.
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