James d. Gwartney

Rapid Growth of the Money Supply
Nigeria
22.6
23.2
Uruguay
23
23.4
Malawi
26.7
23.4
Ghana
29
24.5
Venezuela, RB
37.6
34
Russian Federation
41.4
39.3
Romania
46.1
53.1
Turkey
48.4
41.7
Hypergrowth Growth of the Money Supply
Ukraine
140.4
276.8
Zimbabwe
164.8
165.3
Source: The World Bank (WB), World Development Indicators (WDI), 2015 and International Monetary Fund,
International Financial Statistics (annual).
Note: The data for Ghana and Venezuela are for 1990–2013. The data for Russia are for 1994–2014. The data for
Ukraine are for 1993–2014. In the case of missing data, they were updated from country sources: Canada figures for
1990–2008 come from the World Bank and figures for 2009–2014 come from the Canada Central Bank. The data for
Zimbabwe are for 1990–2007 and come from the World Bank, World Development Indicators 2009 report.
Exhibit 7 illustrates the linkage between growth of the money supply and inflation.

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100
Note how countries that increased their money supply at a slow annual rate (7.5 percent or
less) experienced low rates of inflation during 1990–2014. This was true for large high-income
countries like the United States and Canada, as well as for smaller ones like Sweden,
Singapore, and the Central African Republic.
When the growth rate of the money supply in a country expanded more rapidly,
however, the inflation rate accelerated. During 1990–2014, the money supply grew at an
annual rate between 20 percent and 50 percent in Nigeria, Uruguay, Malawi, Ghana,
Venezuela, Russian Federation, Romania, and Turkey. Note how these countries experienced
annual inflation rates similar to their rates of monetary growth.
Extremely high rates of monetary growth (100 percent and above) lead to
hyperinflation
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, as in Ukraine and Zimbabwe. As the growth rate of the money supply in
these countries soared, so too did their rate of inflation.
As Exhibit 7 illustrates, there is a close relationship between rapid monetary expansion
and high rates of inflation when measured over lengthy time periods. Historically, this linkage
has been one of the most consistent relationships in all of economics.
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