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World Economics - Measuring the World Economy
The Link Between Money and Nominal Spending
Ryland Thomas, World Economics, June 2014
The recent financial crisis has reignited interest in the role of money and credit in driving economic activity. This article takes a broad overview of the historical data available for assessing the link between money, credit and activity, using the quantity theory of money as an organising framework. The article shows that when trying to apply this theory to historical data, a complicated interaction between money and nominal spending emerges. And a deeper understanding of the forces driving money demand and supply is required to interpret the information contained in money about the level of activity and inflation.



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