ECON 102 Chapter Notes - Chapter 6: Anna Schwartz, Seigniorage, Money Supply
Document Summary
Inflation and growth in money: case study: "inflation is and always is a monetary phenomenon" thus wrote the great economist milton friedman, who won the nobel prize in economics in. 1976: the theory of the quantity of money leads one to believe that the primary determinant of the rate of inflation is the rise of the sum of money. But the argument friedman puts out is empirical, not theoretical. The data verifies the amount of money in which inflation and output are related. Decades with fast monetary growth tend to have high inflation, and decades with weak monetary growth seem to have low inflation. It shows the real inflation rate and money growth trend over the 1990s in over 100 countries. Once again, the link between monetary growth and inflation is high. The inflation theory works well in the long run, not short-term.
