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Quantity Theory of Money

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Abstract

After formally setting out the quantity theory of money, including the distinction between the nominal quantity of money and the real quantity of money, and various quantity equations, this article considers the Keynesian challenge to the theory (which seemed vindicated during the economically successful 1950s and 1960s) and the revival of belief in the quantity theory in the 1970s as rapid monetary growth was accompanied by stagflation and rising interest rates. It deals with the natural rate hypothesis and the theory of rational expectations, surveys the empirical evidence, and ends with a consideration of policy implications.

This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume

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    Milton Friedman

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    Friedman, M. (2008). Quantity Theory of Money. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_1640-2

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    • DOI: https://doi.org/10.1057/978-1-349-95121-5_1640-2

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    1. Latest

      Quantity Theory of Money
      Published:
      10 March 2017

      DOI: https://doi.org/10.1057/978-1-349-95121-5_1640-2

    2. Original

      Quantity Theory of Money
      Published:
      26 November 2016

      DOI: https://doi.org/10.1057/978-1-349-95121-5_1640-1

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