Money and inflation

Abstract The monetarist view of inflation—that inflation is always and everywhere a monetary phenomenon (Friedman 1963, p. 17)—runs contrary to the inflation models we have considered in the preceding chapters. Despite the notable differences that exist between them, they all reflect the view that inflation is best understood as reflecting imbalances in product and labour markets. This view is inconsistent with a simple quantity theory of inflation, but not with having excess demand for money as a source of inflation pressure.