Exchange rates, prices and money: a long-run perspective
De Grauwe, P.
& Grimaldi, M.
(2001).
Exchange rates, prices and money: a long-run perspective.
International Journal of Finance and Economics,
6(4), 289-313.
https://doi.org/10.1002/ijfe.162
& Grimaldi, M.
(2001).
Exchange rates, prices and money: a long-run perspective.
International Journal of Finance and Economics,
6(4), 289-313.
https://doi.org/10.1002/ijfe.162
In this paper we analyse the long-run proportionality and neutrality propositions between inflation and money growth and between exchange rate changes and money growth. Using a sample of 100 countries over a thirty-year period we find that the evidence in favour of these propositions is weak for the low inflation countries and very strong for the high inflation countries. We propose an explanation based on productivity shocks and transaction costs.