Monetarism is an economic theory
that governments must use interest rates and control of the supply of money for the
purpose of economic regulation. There is controversy over the role of monetarist policies
in the current deficit problems of most of the worlds' economies. Monetarism is associated
with neo-conservatism, a version of liberalism that stresses free
markets and individualism rather than the welfare state vision that was dominant in western societies.
Monetarism is in contrast to Keynesian economics which advocates taxation
and budgetary policy or fiscal policy. Monetary
instruments for economic regulation is to provide a lever to influence macro-economic
cycles in the economy. The Keynesian policies of post-World War Two capitalism was a retreat from confrontation with the working class. Friedmans monetarism became popular in
Thatchers Britain and Reagans U.S.A., in the 1970s and early 1980s after the
failure of Keynesian policies after the breakdown of the Bretton Woods arrangements in
Monetarism is the economic
doctrine of Milton Friedman, that the money supply, the total amount of money circulating
in an economy is the chief controller of the level of economic activity. Monetarism has
become the dominant theory in both academic economics and public policy. The idea of
monetarism is that if the money supply is restricted, then prices must fall and/or the
rate of circulation of money must go down. Restricting the supply of money and credit
could be used by the government to cut inflation and increase unemployment.
By the end of the 1980s
monetarism was abandoned. Monetarism was supplanted by a variety of policies, such as
Micro-Economic Reform, which emphasized the need to tackle the resistance of the working
class in hand to hand fighting with union-busting, unemployment, and divide-and-rule
practices in the workplace.
The Success of the Fed
and the Death of Monetarism - N. Kindan Kishor and Levis A. Kochin.
Monetarists blamed fluctuations in inflation on excessively volatile growth in monetary
aggregates. The data supported this hypothesis until 1982. Since 1983 monetary aggregates
have been essentially uncorrelated with subsequent inflation in the U.S.
MODIGLIANI ON MONETARISM: A RESPONSE - THOMAS MAYER, Professor,
University of California Davis.
This reply to Franco Modigliani's (1988) criticism of monetarism is not a consensual
monetarist response but merely the reaction of a moderate monetarist or a monetarist
MONETARISM AND THE USE OF MARKET PRICES AS MONETARY POLICY INDICATORS -
ROBERT E. KELEHER.
Recently proposed strategies for employing market price indicators as guides to monetary
policy embody many key propositions of monetarism. The market price approach differs from
monetarism key areas: the environments in which the approach works, and the policy role of
BEYOND KEYNESIANISM AND MONETARISM - MANCUR OLSON, University of
Though there is consensus among economists about microeconomic theory, neither the
Keynesian nor the Monetarist theory of macroeconomics has attracted a consensus.
Monetarism and the Masses
Denmark and Economic Integration in Europe - Martin Marcussen, Mette Z°lner.
We focus on the Danish Economic Monetary Union referendum and identify rules at two
different levels of analysis: causal ideas at the level of elites and deep-rooted cultural
values at the level of the masses.
EDWARD NELSON - Federal Reserve Bank of St. Louis - Research Division; Centre for
Economic Policy Research.
This Paper examines some recent monetary policy debates, in light of commentary on those
issues contained in some of the work of Milton Friedman. Friedman's work considered here
is the commentary on monetary policy in his Newsweek magazine columns from 1966 to 1984.
IS-LM and Monetarism
MICHAEL D. BORDO, Harvard University; ANNA J. SCHWARTZ, National Bureau of Economic
We explore the views of two principal spokesmen for monetarism: Milton Friedman and the
team of Karl Brunner and Allan Meltzer.
David Laidler on Monetarism
Michael Bordo, Anna J. Schwartz
Abstract: David Laidler has been a major player in the development of the monetarist
tradition. As the monetarist approach lost influence on policy makers he kept defending
the importance of many of its principles.