Inflation trends reshape money demand, leading to increased monetary neutrality.
The article explores how changes in people's preferences for holding money affect the demand for money over time. The researchers found that as inflation increased in the 1970s, people became less sensitive to changes in interest rates when deciding how much money to hold. In the 1980s, new financial options led to further decreases in this sensitivity. These shifts in money demand helped reduce the negative impact of inflation on the economy, leading to a more stable monetary system.