monetarism

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Related to monetarist: Keynesian, Monetarist Theory

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 ?
Carlson, "A Monetarist Model for Economic Stabilization," Federal Reserve Bank of St.
Thus, when viewed from a monetarist perspective, economic conditions today appear as an inverse image of how they seemed as recently as 2016.
Keynesian and monetarist schools differ on the effectiveness of market forces in re-establishing the full-employment level of real income.
I develop the argument as follows: In Section II I briefly summarize NGDP targeting, the Market Monetarist School, and its similarities to free banking and monetary disequilibrium.
The vertical "monetarist" Phillips curve is presented in Figure 2.
Granger causality testing can be used as an effective tool to identify causal relationships between variables which represent different instruments and objectives of the monetarist transmission.
The moves mark a shift in concern, away from inflation to unemployment, and a turnaround in policy - away from Milton Friedman's monetarist focus on price stability, circa the 1970s, to John Maynard Keynes' emphasis on employment stability during the Great Depression.
The disastrous monetarist policies of Thatcher's 80s are back.
But he was never what Mrs Thatcher termed "one of us", opposing the harshness of her monetarist economic policies and reportedly coining the nickname "Tina" from the initials of her mantra "There is no alternative".
Beginning with an explanation of why the study of economics is critically important, to such contemporary issues as the 2008 financial collapse leading to the present national and global problems of unemployment and inflation, to Keynesian, monetarist, and other economic perspectives, to the classic considerations of supply and demand, to labor and capital markets, to the relationship of governmental policies and income distribution, "Economics" presents an informed and informative text that is 'reader friendly' and comprehensive, making it ideal and highly recommended for academic curriculums and community library Economic Studies collections.
The underlying axiom of monetarist theory (Friedman, 1986) is that every crisis is triggered by disturbances in the regularity of money supply.
Perhaps economics departments are reorienting themselves after the Great Recession in a way similar to how they reoriented themselves in a monetarist direction after the inflation of the 1970's.