Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258874 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 15 [Issue:] 4 [Article No.:] 151 [Publisher:] MDPI [Place:] Basel [Year:] 2022 [Pages:] 1-14
Publisher: 
MDPI, Basel
Abstract: 
The quantity equation is a well-established, theoretic, long-run concept that has been criticized for a variety of reasons, i.e., that no precise statements about causality or dynamics between money growth and inflation can be inferred from its components. These shortcomings can be tackled by estimating inflation based upon a holistic approach and the performance of a ceteris paribus analysis for various levels of quantity and velocity of money, as well as GDP. By testing the validity of the quantity equation, it is possible to evaluate possible effects of elevated budget deficits, unprecedented expansions of the monetary base caused by global lockdowns, and a crash in global productivity, on inflation. The main findings of this paper suggest that the level of productivity is the main driver of inflation. The quantity and velocity of money only play a subordinate role in the determination of the inflation level. If inflation is holistically seen as a function of the quantity and velocity of money, as well as general economic productivity, the level of inflation can be very well explained by comparing the supply side with general economic productivity.
Subjects: 
inflation
linear estimation
quantity theory of money
driver analysis
JEL: 
E01
E03
E04
E05
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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