Monetarism
Also known as: monetarist
- 1Monetarism emphasizes the money supply as the main driver of economic performance.
- 2The school of thought rose to prominence during the 1970s.
- 3It was largely superseded by inflation targeting frameworks in the 1980s.
- 4The approach advocates for policy-makers to prioritize the control of money circulation.
Monetarism is a school of thought in monetary economics that emphasizes the role of policy-makers in controlling the amount of money in circulation.
Connections11
core mechanism of economic control advocated by monetarists
Monetarists argue that central banks should focus on maintaining a steady growth rate of the money supply rather than attempting to fine-tune the economy.
central economic problem addressed by monetarist policy
Monetarists famously argue that inflation is always and everywhere a monetary phenomenon caused by excessive growth in the money supply.
academic home and institutional base for the development of monetarism
The Chicago school provided the environment where Friedman and his colleagues developed and refined monetarist principles.
leading intellectual figure and primary proponent of monetarism
Friedman was the most prominent economist associated with the school, providing the theoretical and empirical framework that defined the movement.
primary institution criticized by monetarists for its historical policy...
Monetarists frequently analyze the Federal Reserve's actions, particularly during the 1930s, as a case study for the dangers of improper monetary management.
institutional actor responsible for implementing monetarist policy reco...
Monetarism places the responsibility for economic stability on the central bank's ability to control the money supply through interest rates and open market operations.
primary intellectual rival and target of monetarist critique
Monetarism emerged as a direct challenge to the Keynesian consensus, arguing that fiscal policy is less effective than monetary policy in managing the economy.
mathematical identity used to formalize the quantity theory of money
The equation MV=PY serves as the formal basis for monetarist analysis, linking money supply (M) and velocity (V) to price levels (P) and output (Y).
an economic school emphasizing the importance of money supply
Monetarism argues that variations in the money supply are the primary cause of fluctuations in nominal GDP and inflation, advocating for steady growth in the money supply.
school of thought emphasizing stable velocity
Monetarists, led by Milton Friedman, argued that velocity is relatively stable, making the money supply the primary determinant of nominal GDP.
modern school of thought based on the theory
Monetarism is a macroeconomic school of thought that emphasizes the role of governments in controlling the amount of money in circulation, directly building upon the quantity theory.
Monetarism is a macroeconomic school of thought that centers on the belief that the money supply is the primary determinant of economic activity. Proponents argue that policy-makers should focus on controlling the quantity of money in circulation to maintain economic stability and manage price levels.
Inflation Deflation M2 money supply increases Year/YearWikimedia Commons: File:CPI_1914-2022.webpMoney supply decreased significantly between Black Tuesday and the Bank Holiday in March 1933 in the wake of massive bank runs across the United States.Wikimedia Commons: File:Money_supply_during_the_great_depression_era.png This theory gained significant influence during the 1970s as a response to economic instability. However, its prominence as a direct guide for policy waned in the 1980s as central banks shifted their focus toward inflation targeting and the manipulation of official interest rates rather than strictly managing the money supply.