The central predictions of the quantity theory are that, in the long run, money growth should be neutral in its effects on the growth rate of production and should affect the inflation rate on a one-for-one basis.

The observation that money changes induce output changes in the same direction receives confirmation in some data sets but is hard to see in others. Large-scale reductions in money growth can be associated with large-scale depressions or, if carried out in the form of a credible reform, with no depression at all.

Monetary contractions are attractive as the key shocks in the 1929-1933 years, and in other severe depressions, because there do not seem to be any other candidates.

Robert Lucas, Jr. Quotes