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Economic Commentary

Money Growth and Inflation: Does Fiscal Policy Matter?

The determinants of inflation have long interested both economists and central bankers. This interest has taken on renewed importance in light of a growing consensus that central banks should —first and foremost—pursue price stability. The roots of this argument date back to Milton Friedman’s famous dictum that “inflation is always and everywhere a monetary phenomenon.” Yet recently this view has come under attack. As figure 1 illustrates, there has been virtually no correlation between money growth and inflation since at least the early 1980s.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit for updates.

Suggested Citation

Carlstrom, Charles T., and Timothy S. Fuerst. 1999. “Money Growth and Inflation: Does Fiscal Policy Matter?” Federal Reserve Bank of Cleveland, Economic Commentary 4/15/1999.