Money and Inflation: Revisiting Friedman

ABSTRACT This paper revisits the relationship between money growth and inflation using a large cross‐country data set covering advanced and developing economies over the period 1970–2025. Motivated by renewed debates following large‐scale monetary expansion and the post‐pandemic resurgence of inflation, the paper re‐examines the proposition associated with Friedman that sustained inflation ultimately requires sustained monetary accommodation. Using heterogeneous panel estimators and local projection methods, the analysis examines the medium‐ and long‐run association between money growth and inflation, short‐run dynamics and heterogeneity across countries and inflation regimes. The results indicate a positive association between money growth and inflation over medium‐ and long‐run horizons, but with substantial variation across macroeconomic environments. The relationship is stronger and more persistent in emerging and developing economies and in high‐inflation regimes, while weaker in advanced economies characterized by credible monetary frameworks and anchored expectations. Dynamic estimates further suggest that periods characterized by faster money growth are associated with persistently higher inflation over subsequent years and that this relationship evolves gradually rather than immediately. Overall, the findings suggest that the apparent instability of the money–inflation nexus reflects heterogeneous macroeconomic regimes and evolving monetary relationships rather than the disappearance of systematic monetary regularities.