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Show Me the Money. Why Neglecting Money in Monetary Theory and Policy is a Bad Idea

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  • Olivo, Victor

Abstract

This paper discusses numerous and serious conceptual criticisms of arguments and theories that consider that inflation and the price level are exclusively a fiscal phenomenon in which money plays no distinctive role. The price level, substantial acceleration of the inflation rate or sustained inflation rates of two digits or more cannot be explained by expectations or changes in expectations alone as Sargent (1982), Woodford (2008) and the FTPL proponents claim. The empirical evidence obtained using cointegration and error correction models estimated using linear and non-linear techniques provides robust indication that money plays a crucial role in understanding the long-run evolution of the price level and the short-run dynamics of inflation.

Suggested Citation

  • Olivo, Victor, 2023. "Show Me the Money. Why Neglecting Money in Monetary Theory and Policy is a Bad Idea," MPRA Paper 118993, University Library of Munich, Germany, revised 27 Oct 2023.
    • Handle: RePEc:pra:mprapa:118993
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    References listed on IDEAS

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    Cited by:

    1. Olivo, Victor, 2024. "A Reexamination of the Relationship Between Money Growth and Inflation Around the World: 1961-2022," MPRA Paper 122587, University Library of Munich, Germany, revised 02 Nov 2024.
    2. Olivo, Victor, 2023. "Hyperinflation in Venezuela. An Analysis Based on Cagan's Conceptual Framework," MPRA Paper 119195, University Library of Munich, Germany, revised 19 Nov 2023.

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    More about this item

    Keywords

    Price Level; Inflation; Monetarism; Monetary; Monetary Base; Monetary Policy; Money; Money Stock.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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