monetarism

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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.
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 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.
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) 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).
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 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
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References in periodicals archive ?
Shaghil Ahmed, "Wage Stickiness and the Non-Neutrality of Money: A Cross-Industry Analysis," Journal of Monetary Economics, 20, July 1987, pp.
Researchers in the NBER's Program in Monetary Economics contribute to our understanding of issues in monetary policy and macroeconomics by conducting empirical and theoretical studies of a wide range of subjects.
Jeremy Stein, formerly a Research Associate in the NBER's Programs on Corporate Finance and Monetary Economics, resigned from the NBER when he was confirmed as a member of the Board of Governors of the Federal Reserve System.
Martin Eichenbaum is a Research Associate in the NBER's Programs on Economic Fluctuations and Growth, Monetary Economics, and International Finance and Macroeconomics.
He is an Associate Editor of the Journal of Monetary Economics and a Fellow of the Econometric Society.
The collection reprints 13 papers originally published in the Journal of International Economics, the Journal of Monetary Economics and other journals since 2000 that describe how the global integration of goods and asset markets tends to imply more extensive transmission of business cycle shocks across borders.
Members of the NBER's Monetary Economics Program met in Cambridge on November 3.
Jerome Powell will become the first Federal Reserve chairman in four decades without an advanced degree in monetary economics - but he cannot turn his back on the huge task ahead of him placed by Donald Trump.