Is quantity theory still alive?

Pedro Teles*, Harald Uhlig, João Valle e Azevedo

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

23 Citations (Scopus)


This article investigates whether the quantity theory of money is still alive. We demonstrate three insights. First, for countries with low inflation, the raw relationship between average inflation and the growth rate of money is tenuous at best. Second, the fit markedly improves, when correcting for variation in output growth and the opportunity cost of money, using elasticities implied by the theories of Baumol-Tobin and Miller-Orr. Finally, a subsample characterised by the adoption of inflation targeting shows considerably less inflation variability, worsening the fit of a one-for-one relationship between money growth and inflation.
Original languageEnglish
Pages (from-to)442-464
Number of pages23
JournalEconomic Journal
Issue number591
Publication statusPublished - 1 Mar 2016


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