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Is Inflation Always and Everywhere a Monetary Phenomenon?

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  • Paul De Grauwe
  • Magdalena Polan

Abstract

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. Copyright The editors of the "Scandinavian Journal of Economics", 2005 .

Suggested Citation

  • Paul De Grauwe & Magdalena Polan, 2005. "Is Inflation Always and Everywhere a Monetary Phenomenon?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 239-259, June.
  • Handle: RePEc:bla:scandj:v:107:y:2005:i:2:p:239-259
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    References listed on IDEAS

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    1. James H. Stock & Mark W. Watson, 1987. "Interpreting Evidence on Money-Income Causality," NBER Working Papers 2228, National Bureau of Economic Research, Inc.
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    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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