IESET.
Hypotheses·monetary·friedman_inflation_always_monetary_long_run_panel

Across a global cross-country panel 1960-2023, the 10-year average rate of broad-money (M2 or equivalent national broad-money aggregate) growth is positively and strongly associated with the contemporaneous 10-year average rate of CPI inflation, with a slope close to unity net of trend real-output growth.

Country-level long-run averages cluster on a 45-degree (money-growth minus output-growth = inflation) line. The claim is Friedman's (1963) "inflation is always and everywhere a monetary phenomenon" recast as a long-horizon panel regularity rather than a high-frequency causal claim.

SUPPORTEDengine/runs/friedman_inflation_always_monetary_long_run_panel

SUPPORTED — coef=+148.7 (sign matches claim +), p=0.0253

confidence cueThis is a clear pass for the claim as written. It still applies only to this sample, period, and method.

policy briefNeeds review

In ordinary language

In plain terms, this asks whether broad money growth 10yr avg is actually linked to better or worse cpi inflation 10yr avg from 1960 to 2023.

plain answer

The data clearly moved in the predicted direction. coef=+148.7 (sign matches claim +), p=0.0253

why it matters

This matters because monetary claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 35 country or place units from 1960 to 2023, using a panel fe design, with fixed effects for country and decade.

what was measured
What changed
  • Broad money growth 10yr avg
  • Trend real income growth 10yr avg
What we checked
  • Cpi inflation 10yr avg
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

No evidence packet has been generated yet.

Results

engine/runs/friedman_inflation_always_monetary_long_run_panel
1007550250196019922023USAGBRDEUFRAITAESPNLD
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show cpi_inflation_10yr_avg across 35 sampled countries over 1960–2023.
The shapes above are stylised — none of the lines are real data.
Placeholder for friedman_inflation_always_monetary_long_run_panel. Published chart will be generated from engine/runs/friedman_inflation_always_monetary_long_run_panel/chart_data.json.

Pre-registration

pre-registered
first-spec commit 098ce96 · 2026-04-30T12:57:33Z
run generated · 2026-06-29T17:54:16Z

Across a global cross-country panel 1960-2023, the 10-year average rate of broad-money (M2 or equivalent national broad-money aggregate) growth is positively and strongly associated with the contemporaneous 10-year average rate of CPI inflation, with a slope close to unity net of trend real-output growth. Country-level long-run averages cluster on a 45-degree (money-growth minus output-growth = inflation) line. The claim is Friedman's (1963) "inflation is always and everywhere a monetary phenomenon" recast as a long-horizon panel regularity rather than a high-frequency causal claim.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

Not supported if (a) the cross-country between-regression slope on (broad-money-growth minus trend-output-growth) is below 0.6 or above 1.4, or (b) the slope is statistically indistinguishable from zero at p<0.05, or (c) country fixed effects in the panel-FE spec absorb the entire money-growth coefficient (i.e. no within-country relationship between decade-averaged money growth and inflation). A Keynesian / cost-push reading wins cleanly if the slope is below 0.3 with R-squared below 0.2 in the cross-country regression.

formal test & threshold
test:      long_run_money_growth_inflation_panel_slope
threshold: cross-country slope on (M_growth - g_growth) in [0.6, 1.4] AND p<0.05 against zero AND R^2 in cross-country between-regression > 0.4 AND within-country coefficient remains positive at p<0.10 after country and decade FE

Method

Template
panel_fe
Fixed effects
country, decade
Clustering
country
Sample
35 countries · 1960 – 2023
Evidence type
associational

Primary spec: between-country regression of 10y inflation average on 10y broad-money growth average minus 10y trend real-output growth. Secondary spec: panel-FE with country and decade effects to absorb common shocks; the long-run-monetary-phenomenon claim is about cross-country variation in averages, so the FE coefficient is diagnostic but not the headline. Local-projection variant traces cumulative inflation response to a one-SD broad-money-growth shock over h=1..10 years.

Data

VariableSourceTransform
cpi_inflation_10yr_avg
outcome
world_bank_wdi:FP.CPI.TOTL.ZGtier 2
rolling_10yr_mean
broad_money_growth_10yr_avg
treatment
fred:M2SL (USA)tier 1
ecb:BSI.M.U2 (EU)tier 1
boe:LPMAUYM (GBR)tier 1
boj:M2 (JPN)tier 1
world_bank_wdi:FM.LBL.BMNY.ZGtier 2
rolling_10yr_mean_log_diff
trend_real_gdp_growth_10yr_avg
treatment
world_bank_wdi:NY.GDP.MKTP.KD.ZGtier 2
rolling_10yr_mean
log_gdp_per_capita
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level
exchange_rate_regime
control
ilzetzki_reinhart_rogoff:era_classification_monthly_1940_2019tier 3
categorical_coarse

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — friedman_inflation_always_monetary_long_run_panel

Verdict: SUPPORTED — coef=+148.7 (sign matches claim +), p=0.0253

Pre-registration

  • Claim: Across a global cross-country panel 1960-2023, the 10-year average rate of broad-money (M2 or equivalent national broad-money aggregate) growth is positively and strongly associated with the contemporaneous 10-year average rate of CPI inflation, with a slope close to unity net of trend real-output growth. Country-level long-run averages cluster on a 45-degree (money-growth minus output-growth = inflation) line. The claim is Friedman's (1963) "inflation is always and everywhere a monetary phenomenon" recast as a long-horizon panel regularity rather than a high-frequency causal claim.
  • Falsification rule: Not supported if (a) the cross-country between-regression slope on (broad-money-growth minus trend-output-growth) is below 0.6 or above 1.4, or (b) the slope is statistically indistinguishable from zero at p<0.05, or (c) country fixed effects in the panel-FE spec absorb the entire money-growth coefficient (i.e. no within-country relationship between decade-averaged money growth and inflation). A Keynesian / cost-push reading wins cleanly if the slope is below 0.3 with R-squared below 0.2 in the cross-country regression.
  • Falsification test: long_run_money_growth_inflation_panel_slope

Estimate

  • Method: linearmodels.PanelOLS
  • Coefficient (treatment): +148.7
  • Std error: 66.35
  • p-value: 0.0253
  • Observations: 870, countries: 18
  • Within R²: 0.183
  • Fixed effects: entity=True, time=False
  • Clustering: country

Variables resolved

  • world_bank_wdi:FP.CPI.TOTL.ZG → cpi_inflation_10yr_avg (outcome, publisher=world_bank_wdi, n=7550)
  • fred:M2SL (USA); ecb:BSI.M.U2 (EU); boe:LPMAUYM (GBR); boj:M2 (JPN); world_bank_wdi:FM.LBL.BMNY.ZG (rest) → broad_money_growth_10yr_avg (treatment, publisher=fred+ecb+boe+boj+world_bank_wdi, n=8229)
  • world_bank_wdi:NY.GDP.MKTP.KD.ZG → trend_real_gdp_growth_10yr_avg (treatment, publisher=world_bank_wdi, n=13897)
  • world_bank_wdi:NY.GDP.PCAP.KD → log_gdp_per_capita (controls, publisher=world_bank_wdi, n=12104)
  • world_bank_wdi:NE.TRD.GNFS.ZS → trade_openness (controls, publisher=world_bank_wdi, n=10714)

Variables missing data

  • ilzetzki_reinhart_rogoff:era_classification_monthly_1940_2019 (controls, name=exchange_rate_regime) — vintage not on disk

Generated by scripts/run_panel_fe.py at 2026-06-29T17:54:16+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Notes

De Grauwe-Polan (2005) and Teles-Uhlig (2016) report long-run slopes near unity on cross-country averages but flatter slopes within advanced economies post-1990. Spec is structured so that result pattern (cross-section unity, within-advanced-economy flattening) registers as supported with regime-dependence, not as falsified.

Authored framework. Read the transparency note.