Monetary Policy and Inflation: Quantity Theory of Money (Routledge Focus on Economics and Finance)

Recent years have seen a return to high inflation that has sparked debate about the causal role of monetary policy in significant price increases, especially in the context of the quantity theory of money.This book builds upon a long-accepted tradition of quantity theory of money in explaining long-run inflation levels. It elucidates how and why - despite its important limitations - the theory can be applied throughout history, including the 2022 spikes in inflation.It also demonstrates how and why the quantity theory, with some internally good reasons, is not part of the modern monetary policy framework.The book argues that firstly, the issue of non-operationability of the money supply is a policy problem, but not a causality problem.Secondly, while some models can work without money, and while a simple deterministic relationship between money base and aggregates may not exist, the author shows that there is still room for quantity theory to be true.Thirdly, perhaps most importantly,