THE QUANTITY THEORY OF MONEY AND ITS LONG-RUN IMPLICATIONS

This paper examines three propositions implied by the quantity theory of money, namely, the neutrality hypothesis, the Fisher hypothesis and the monetary approach to exchange rate determination for six develope d countries within a dynamic framework, which incorporates the long-ru n proposition as its steady-state solution while allowing for short-ru n deviation from the hypothesized long-run relationships to take place . The joint hypothesis that all three propositions are satisfied simul taneously is supported only for two countries.