Accordingly, the movement of the aggregate price level must have been caused by a mismatch between aggregate demand and aggregate supply. Wicksell therefore stressed that any theory which intends to explain the overall rate of inflation must therefore be able to explain the underlying aggregate demand and supply movements.
A second important aspect of Wicksell’s theory is related to the role of money and credit. He did not doubt that money growth is a necessary condition for inflation, but his approach is based on the endogeneity of money – in other words, money is not exogenous.