International Historical Evidence on Money Growth and Inflation: The Role of High Inflation Episodes

How long is the long run in the relationship between money growth and inflation? How important are high inflation episodes for the unit slope finding in the quantity theory of money? To answer these questions, we study the relationship between excess money growth and inflation over time and across frequencies using annual data from 1870 to 2013 for 16 developed countries. Wavelet-based exploratory analysis shows the existence of a close stable relationship between excess money growth and inflation only over long time horizons, i.e. periods greater than 16–24 years, with money growth mostly leading. When we investigate the sensitivity of the unit slope finding to inflation episodes using a “time-frequency-based” panel data approach, we find that low-frequency regression coefficients estimated over variable-length subsamples are largely affected by high inflation episodes occurring in the 1910s, the 1940s, and the 1970s. Taken together, our results suggest that inflationary upsurges affect regression coefficients, but not the closeness of the long-run relationship. This reconciles the validity of the quantity theory of money with the current disinterest of monetary policymaking in money growth.

As fontes da teoria quantitativa do dinheiro no Manual de Confessores de Frei Rodrigo do Porto (1549)

In this historic essay we have investigated the origins of the Quantity Theory of Money in Portugal the middle of the Golden Age. We have found out the origins of this theory in the first Portuguese book of moral theology Manual de Confessores e Penitentes that was composed by the Franciscan Portuguese friar Rodrigo do Porto and was printed in the University of Coimbra in 1549. Also we have found out the inspiration from father Rodrigo do Porto for the formation of economic thought (the theories of just price and the quantity theory) of the great Spanish thinker and true discoverer of the Quantity Theory doctor Martinho de Azpilcueta Navarro. Resumo: Neste ensaio histórico investigamos as origens da Teoria Quantitativa do Dinheiro (Moeda) em Portugal do meio do Século d’Ouro. Temos encontra-do as fontes desta teoria na primeira suma portuguesa da teologia moral Manual de Confessores e Penitentes que foi composto pelo franciscano portu-guês frade Rodrigo do Porto e foi impressa na Universidade de Coimbra em 1549. Também temos encontrado a inspiração de frei Rodrigo do Porto para a formação do pensamento econômico (das teorias do preço justo e da teoria quantitativa) do grande pensador espanhol e verdadeiro descobridor da Teo-ria Quantitativa do Dinheiro doutor Martinho de Azpilcueta Navarro. Palavras-chave: Teoria Quantitativa do Dinheiro (Moeda), Século d’Ouro, Ma-nual de Confessores (1549), Rodrigo do Porto, Martim de Azpilcueta Navarro Keywords: Quantity Theory of Money, Golden Age, Manual de Confessores (1549), Rodrigo do Porto, Martinho de Azpilcueta Navarro

Non-neutrality of money

This chapter summarises the key ingredients of Schumpeter's monetary theory. While his writing on monetary matters is spread across multiple sources, one may summarise his endeavour in three integrative steps: First, he elaborated the claim theory into a general vision of money as a purely symbolic system of social accounts. Second, he put the quantity theory into a straightjacket of diminished relevance and refocused it in the income-expenditure approach. Finally, he applied further threads from the heterodox literature, most notably the notions of endogenous credit and forced savings, in order to link money with the real economy. Thus, lifting the veil of money and rebutting the postulate of its neutrality, his main assertion was that the endogenous supply of credit renders changes in the price structure an important driver of economic development.

Macroeconomics: the workings of the whole economy.

As a first step in analysing the workings of the aggregate economy and offering explanations for macroeconomic phenomena, this chapter constructs a simple model of the flow of income within the economy and uses it to explain what determines the level of that flow. The multiplier effect, the level of aggregate demand, the equilibrium level of national income, policies to control unemployment, inflation, the quantity theory of money, economic growth and its costs are then discussed.