Monetarism Meaning: Definition, Examples, and Translations
๐ฐ
monetarism
[หmษnษชtษหrษชzษm ]
Definition
economic theory
Monetarism is an economic theory that emphasizes the role of governments in controlling the amount of money in circulation. It posits that variations in the money supply have major influences on national output in the short run and the price level over longer periods. Monetarists believe that controlling inflation is crucial to maintaining economic stability. They often advocate for fixed rules for the growth of the money supply, rather than active government intervention in the economy.
Synonyms
economic policy, monetary theory.
Examples of usage
- The government adopted monetarism to combat inflation.
- Many economists support monetarism as a viable framework for understanding monetary policy.
- Monetarism emphasizes the relationship between money supply and economic stability.
Translations
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Interesting Facts
Historical Origins
- The term was popularized in the 1970s, primarily through the work of economist Milton Friedman.
- Friedman argued that changes in money supply had major influences on the economy, especially regarding inflation.
- Monetarism emerged as a reaction against Keynesian economics, which emphasized government spending and policies instead.
Economic Principles
- Monetarists believe that controlling the money supply is crucial to controlling inflation.
- They advocate for a steady, predictable increase in the money supply to promote economic stability.
- Monetarism suggests that markets are usually efficient at self-regulating, limiting the need for government intervention.
Critiques and Counterarguments
- Critics argue that focusing solely on the money supply ignores other important factors like fiscal policy and global markets.
- During economic downturns, some economists believe that too strict a control on money supply can worsen recessions.
- Monetarism has been challenged by alternative views, such as supply-side economics, which focus on production factors.
Real-World Applications
- Countries like the United States adopted monetary policies influenced by monetarism during the late 20th century, notably in the 1980s.
- Central banks now often use interest rate changes and bank reserve requirements to manage the money supply, reflecting monetarist ideas.
- The approach has shaped inflation-targeting strategies used by numerous countries today.
Influential Figures
- Milton Friedman is the most notable figure, receiving the Nobel Prize in Economics in 1976 for his research on consumption analysis and monetary history.
- Friedrich Hayek, while not strictly a monetarist, influenced monetarismโs development through his critique of central planning.
- Anna Schwartz collaborated with Friedman, contributing significantly to the understanding of monetary history and policy.
Origin of 'monetarism'
The term 'monetarism' originated in the mid-20th century, developed chiefly by economists such as Milton Friedman. It emerged as a response to the Keynesian economic theories that dominated the post-World War II era. Friedman and his followers highlighted the importance of controlling the money supply to manage economic stability and inflation. Monetarism gained prominence during the 1970s, especially in the United States and the United Kingdom, as governments faced high inflation and unemployment. As a consequence, the doctrine influenced policies that sought to reduce government intervention in the economy and promote free-market principles, marking a significant shift in economic thought.