Is the Quantity Theory Dead? Lessons from the Pandemic

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 lackof money in monetary policy analysis