The quantity theory of money remains a cornerstone of modern macroeconomics that provides a benchmark for the long-run behaviour of macroeconomic models. The direct empirical evidence for it is, however, less conclusive than suggested by scatterplots and the exaggerated correlations between...

We test the quantity theory of money (QTM) using a novel approach and a large new sample. We do not follow the usual approach of first differentiating the logarithm of the Cambridge equation to obtain an equation relating the growth rate of real GDP, the growth rate of money and inflation. These...

Empirical studies of the "shoe-leather" costs of inflation are typically computed using M1 as a measure of money. Yet, official data on M1 includes all currency issued, regardless of the country of residence of the holder. Using monetary data adjusted for US dollars abroad, we show that the...

Should one think of zero nominal interest rates as an undesirable liquidity trap or as the desirable Friedman rule? I use three different frameworks to discuss this issue. First, I restate Cole and Kocherlakota's (1998) analysis of Friedman's rule: short run increases in the money stock -...

Should one think of zero nominal interest rates as an undesirable liquidity trap or as the desirable Friedman rule? I use three different frameworks to discuss this issue. First, I restate Cole and Kocherlakota's (1998) analysis of Friedman's rule: short run increases in the money stock -...

This paper argues that the 'fiscal theory of the price level' (FTPL) is fallacious. The source of the fallacy is an elementary economic misspecification. The FTPL denies a fundamental property of any model of a market economy, that the budget constraint of any agent, private or public, must be...

The recent surge in consumer prices beginning in 2021 has been attributed by government officials to supply chain disruptions, war in Ukraine, the coronavirus pandemic, and corporate greed. Between 2008Q4 and 2021Q1 the consumer price index (CPI) increased 32 percent from about 211 to 280....

This paper examines the effect of changes in Federal Reserve assets and consumer prices during the stewardship of Federal Reserve Chairman Jerome Powell. Since his appointment in February 2018 until July 2022, the average monthly increase in consumer prices was 0.31 percent—more than 2.4 times...

This paper presents an analysis of the stimulants and consequences of money demand dynamics. By assuming that household's money holdings and consumption preferences are not separable, we demonstrate that the interest-elasticity of demand for money is a function of the household's preference to...

A low-inflation mystery emerged during the 2010-2019 period as the Federal Reserve struggled to hit its two percent inflation target. This paper presents theoretical results and empirical evidence that points to the safe asset shortage as a key reason for the low inflation during this time....