Monetarism

It began from the consensus that what broke out in the late 1960s — stagflation — could not be solved by the "active government intervention to create demand" that Keynes had argued for.

The theory that prices are stabilized when a central bank adjusts its issuance of convertible notes to match its specie reserves. Advocated in Britain in the early 19th century, it developed into the argument that only the right quantity of money can stabilize prices, and that monetary policy is the most important of economic policies. Scholars who follow monetarism are called monetarists. It was developed above all at the University of Chicago, by Milton Friedman among others.

• Money matters.
• The demand function for money is a stable function.
• The money supply is an important variable in determining monetary national income (GNI).
• The interest rate is not a suitable indicator for monetary policy.
• Fiscal policy that does not involve a change in the money supply has almost no effect on the determination of national income.
• Monetary policy should follow strict rules rather than the discretion of the authorities.
• Over the long run there is no negative correlation between the inflation rate and the unemployment rate.

---

Topics: Economics,IMF,Central Bank,Money Supply,Ideology
Category: Wiki/Economy