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A Reexamination of the Relationship Between Money Growth and Inflation Around the World: 1961-2022

Author

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  • Olivo, Victor

Abstract

The main purpose of this paper is to reexamine the relationship between money growth and inflation using a large (unbalanced) panel of 133 countries for the period 1961-2022. The data is split into three subcategories of countries, three subperiods of time, and two intervals of the inflation rate. Applying panel data estimation techniques, I find that money growth continues to be a fundamental variable for understanding the behavior of inflation. Although the impact of money growth on inflation diminishes at lower inflation rates, it is still statistically significant at these lower levels, and it increases markedly when inflation moves beyond the 20 percent threshold. Additionally, there is not an evident reduction in the influence of money growth on inflation in the last thirty years in comparison with the preceding thirty-year period. Finally, I found some evidence that suggests that inflation and money growth might have a negative impact on output growth in the long run.

Suggested Citation

  • 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.
    • Handle: RePEc:pra:mprapa:122587
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    More about this item

    Keywords

    Aggregate price levels; inflation; money supply; money growth; output growth.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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