Is the Quantity Theory Dead? Lessons from the Pandemic

13 Pages Posted: 20 Jan 2023

Multiple version iconThere are 2 versions of this paper

Date Written: January 2023

Abstract

Many policymakers and economists are surprised by the recent high and persistent inflation. This naturally raises questions about what caused it and why it was so unexpected. This paper argues that the quantity theory of money provides a useful framework for forecasting inflation. Anyone equipped with the rather crude forecasting model would have predicted the high and persistent inflation in 2021 and 2022. The failure to foresee such an occurrence was due to the lack of money in monetary policy analysis.

Keywords: monetary policy, money, pandemic, quantity theory

JEL Classification: E51, E52, E58

Suggested Citation

Hendrickson, Joshua R., Is the Quantity Theory Dead? Lessons from the Pandemic (January 2023). Mercatus Research Paper, Available at SSRN: https://ssrn.com/abstract=4327410 or http://dx.doi.org/10.2139/ssrn.4327410

Joshua R. Hendrickson (Contact Author)

University of Mississippi ( email )

Oxford, MS 38677
United States

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