Alexandre Angelloz-Nicoud – Stocks and Quantitative easing

The reason of the lack of inflation?Since the 2008 financial crisis, central banks have developed a large range of new instruments, like quantitative easing and negative deposit facility rates. In consequence, from 2009 to 2019 money stock increased a lot, while growth and inflation were low. According to the quantity theory of money, this situation is not possible. Therefore, a question arises: why was inflation so low during this period? With a New Monetarist model (built on Lagos and Wright, 2005) and by introducing firms and stocks, this article shows that, if money growth rate increases, it may generate inflation less than proportionally and instead increase more than proportionally stocks prices.