A meta-analysis of the multiplier effects of the money supply on prices

This paper seeks to identify what drives the heterogeneity of the empirical results regarding the macro-e conomic effect of the money supply on prices. We carried out a meta-regression analysis on a sample of 261 estimates of the quantity theory of money’s coefficient and obtained a set of characteristics possibly impacting the estimated values. On statistical (and other) grounds, we found it appropriate to investigate two separate subsamples: a subsample consisting of multiplier effects obtained from dynamic linear models with or without error correcting mechanisms or from VECM models, and the other subsample consisting of the multiplier effects obtained from the static linear models or cointegration relation or models with static simultaneous equations. Once the potential biases linked to the authors’ publication strategies had been taken into account, the literature led to two very distinct types of effects: an effect in which money has little or no impact on prices, and an effect in which money plays on prices in accordance with what macroeconomic theory suggests (with a multiplier effect close to 1). On the other hand, the nature of the econometric model used to estimate these multiplier effects appeared to play a major role in the explanation for this heterogeneity of the published results.