Are Money Growth and Inflation Related?

In recent years, some countries have increased the amount of money to support their economies in the current crisis. According to the quantity theory of money an increase in money growth causes inflation in the long run. In this study we tested the long-run relationship between average money growth and average rate of inflation on the sample of countries in four five-year periods from 1993 to 2012. We used the graphical analysis and correlation. The correlation between money growth and inflation is strong or very strong across all time frames except the period of 2008-2012, the period of financial crises. For this period we found strong relationship between money growth and growth of real GDP. The paper's outline is as follows. In Section 1, we begin with some reflections on the body of thought known as the quantity theory of money. Section 2 is concerned with empirical regularities relating to money growth and inflation.