Commodity Prices, Money Surprises, and Fed Credibility
Auth.: G. Hardouvelis
Journal of Money, Credit and Banking, November 1985 (part I), 17: 425-438
STRICT MONETARIST THEORY, IN AN EXTREME FORM, holds that excessive money growth, or the expectation of future money growth, shows up immediately in the rapid inflation of goods prices.
However, it is widely argued that for most goods prices are in fact sticky in the short run and reflect money growth only in the long run. If one seeks a sensitive market measure of the perceived looseness or tightness of monetary policy, one must look elsewhere than at the general price level.