monetarism


Also found in: Dictionary, Thesaurus, Financial, Wikipedia.

monetarism,

economic theory that monetary policy, or control of the money supply, is the primary if not sole determinant of a nation's economy. Monetarists believe that management of the money supply to produce credit ease or restraint is the chief factor influencing inflationinflation,
in economics, persistent and relatively large increase in the general price level of goods and services. Its opposite is deflation, a process of generally declining prices. The U.S.
..... Click the link for more information.
 or deflation, recession (see depressiondepression,
in economics, period of economic crisis in commerce, finance, and industry, characterized by falling prices, restriction of credit, low output and investment, numerous bankruptcies, and a high level of unemployment.
..... Click the link for more information.
) or growth; they dismiss fiscal policy (government spending and taxation) as ineffective in regulating economic performance. Milton FriedmanFriedman, Milton
, 1912–2006, American economist, b. New York City, Ph.D. Columbia, 1946. Friedman was influential in helping to revive the monetarist school of economic thought (see monetarism).
..... Click the link for more information.
 was the leading modern proponent for monetarism.

monetarism

a school of thought in economics and in politics that sees control of the money supply as the key to the management of the economy Monetarists emphasize the need to match the supply of money (including credit) to the capacity of the economy to produce goods and services, if INFLATION is to be controlled and stop-go economic growth avoided. As well as having been a fashionable but controversial theory in academic ECONOMICS (compare KEYNESIAN ECONOMICS), monetarism has also been widely employed in the 1980s by Western governments. It provides a rationale for control of the economy through control of the money supply, including the control of rates of interest, and has also been used as justification for control of state expenditures, and thus the state borrowing which creates credit. The adoption of monetarism was an outcome of the seeming failure of Keynesian economics to prevent high inflation and high unemployment, a loss of international competitiveness and a squeeze on profits. All of these were suggested to be the result of an OVERLOAD ON THE STATE and the escalation of state expenditures.

The issues to which monetarism relates are not only a matter of monetary relations and fiscal policy, or the interests of nation states. Rather, as suggested long ago by MARX, such issues also involve the complex competing interests of multiple groups and classes, internationally as well as within nations. See also HABERMAS, THATCHERISM.

monetarism

1. the theory that inflation is caused by an excess quantity of money in an economy
2. an economic policy based on this theory and on a belief in the efficiency of free market forces, that gives priority to achieving price stability by monetary control, balanced budgets, etc., and maintains that unemployment results from excessive real wage rates and cannot be controlled by Keynesian demand management
www.econlib.org/library/Enc/Monetarism.html
References in periodicals archive ?
The Review contained articles on various aspects of monetary economics: monetary policy, money stock determinants, the transmission mechanism, international money, the demand for money, inflation, gold and the balance of payments, monetarism, and monetary versus fiscal policy.
Yet my suspicion is that a more particular reason explains why Friedman does not fit Blaug's definitions of the quantity theory and monetarism.
The third problem is monetarism, which I think has done a great deal of damage to the world.
So, the political beauty of monetarism was in its depersonalizing this process.
In an earlier study, The Scourge of Monetarism, Kaldor provided a withering attack on "the recrudescence of long-discredited ideas" in the form of monetarism in Britain and the United States, pointing to both the inanities of supply-side logic and the ignorance evident in "strength through misery" approaches to government policy (p.
In that dark decade, before the enlightenment of monetarism and the rise of Our Saviour Thatcher, the most powerful man in Britain wasn't the prime minister, but Jack Jones, the leader of the Transport & General Workers Union.
Kaldor deepened and widened his attack as the meaning of monetarism (at least in Britain) broadened in the 1980s.
ON my last visit to the North, I was taken by Alan Dixon's letter criticising monetarism and calling for a return to Keynesian economics (Voice of the North, October 21).
of Texas at Austin) proclaims the doctrine of Reagonomics to be "Another God That Failed," in reference to the 1949 book of essays by famous ex-communists, in that its theoretical pillars of monetarism, supply-side economics (including tax cuts and deregulation), balanced budgets, and free trade in fact make up nothing more than a governing myth that serve as a mask for the "predator state," which engages in "the systematic abuse of public institutions for private profit or, equivalently, the systematic undermining of public protections for the benefit of private clients.
The 80s, the decade of Loadsamoney Yuppy excess alongside mass unemployment were the product of a failed exercise in Thatcherite monetarism.
They take this monetarism bit pretty seriously, I thought.
But the earlier challenges to macro theory, like monetarism and rational expectations, have been sifted and synthesized successfully.