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The Quantity Theory of Money, Quantitative Easing and the Missing Inflation Phenomenon

Author

Listed:
  • Imad A. Moosa

    (Department of Economics, Kuwait University, Kuwait City, Kuwait)

  • Khalid Al-Saad

    (Department of Economics, Kuwait University, Kuwait City, Kuwait)

  • Ibrahim N. Khatatbeh

    (Business School, Hashemite University, Zarqa, Jordan)

Abstract

Several explanations have been put forward for the observation that massive inflation has not appeared as a result of the explosive monetary growth generated by quantitative easing that was in 2008. Several plausible explanations have been put forward for this observation, but none of them can explain the huge gap between monetary inflation and price inflation. The alternative explanation presented in this paper is that monetary inflation is more reflected in stock prices than the CPI. It is demonstrated that by adjusting the CPI to reflect changes in stock prices, the gap between the trends of the money supply the CPI can be almost eliminated.

Suggested Citation

  • Imad A. Moosa & Khalid Al-Saad & Ibrahim N. Khatatbeh, 2024. "The Quantity Theory of Money, Quantitative Easing and the Missing Inflation Phenomenon," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 13(2), pages 71-88.
    • Handle: RePEc:cbk:journl:v:13:y:2024:i:2:p:71-88
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    More about this item

    Keywords

    Quantitative Easing; Monetary Inflation; Price Inflation; Quantity Theory of Money.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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