Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154038
Authors: 
Teles, Pedro
Uhlig, Harald
Year of Publication: 
2013
Series/Report no.: 
ECB Working Paper 1605
Abstract: 
This paper investigates whether the quantity theory of money is still alive. We demonstrate three insights. First, for countries with low inflation, the raw relationship between average inflation and the growth rate of money is tenuous at best. Second, the fit markedly improves, when correcting for variation in output growth and the opportunity cost of money, using elasticities implied by theories of Baumol-Tobin and Miller-Orr. Finally, the sample after 1990 shows considerably less inflation variability, worsening the fit of a one-for-one relationship between money growth and inflation, and generates a fairly low elasticity of money demand.
Subjects: 
inflation targeting
money demand
money demand elasticity
quantity theory
JEL: 
E31
E41
E42
E50
Document Type: 
Working Paper

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