Abstract: To avoid the influences of the subprime mortgage crisis, the U.S. has begun to cut interest rates by a large margin since the end of 2007. It also has adopted the quantitative easing monetary policy to increase the liquidity since 2009. Meanwhile, since 2008, most countries around the world, especially the emerging markets and the developing economic entities, have experienced severe inflations. The existing literatures have ascribed it to the U.S. QE policy, but in fact this is not the case. Although the QE policy of the U.S. has indeed raised the inflation rate since 2008, it cannot explain the fact that the inflation rate of the emerging market and the developing economies is generally higher than that in the developed ones. Therefore, the U.S. easing monetary policy has only exacerbated the existing inflation, and the root cause of the high inflation still lies in the higher money supply of those countries.

Key words: monetary policy; quantitative easing policy; inflation; exchange rate system; money supply