The paper is titled: Revisiting the Quantity Theory of Money: Money Growth, Money Velocity and Inflation in the US, 1948-2021
Abstract:
Leading central banks did not anticipate the surge in inflation in 2021 and 2022. In our paper we assess whether changes in the velocity of money and monetary growth (broadly-defined)explain long term inflation patterns in the US .We use a hundred-year sample to study the long term and the cyclical behaviour of money velocity. We find that changes in the velocity of money are short lived, and revert to its mean. We also characterise the periods where changes in money velocity have kept closer to its mean as those of monetary equilibrium. We use a regime switching model to test for the impact of changes in the amount of money (broadly defined) and in money velocity in inflation over the medium and long term. Our model explains both the non-inflationary outcome of the Global Financial Crisis and the surge in inflation in the aftermath of Covid-19 pandemic
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