What It Means to Be A Monetarist

Abstract

The pioneer of Monetarism is M.Friedman and other notable Monetarists are Karl Brunner, and his student, later colleague Allan Meltzer and other less known economists. But M.Friedman stands out. He was an early critique of Keynes and leaned towards traditional Classical and Neo-Classical macroeconomic system. In 1956, he had published his famous “Quantity Theory – A. Restatement” in his studies in Quantity Theory of Money (Chicago). Later, in 1963 he published along with David Meisalman “The Relative Stability of Monetary Velocity and the Investment Multiplier in the US 1897-1958" in which study the showed that the classical velocity of money was a more stable parameter for the time studied compared to the Keynesian multiplier. This was a powerful attack on Keynes. Later, the New Keynesians, however, used the same data with different lags and proved the reverse, that is, the Keynesian Multiplier was more stable than monetary velocity of money. All throughout the '50s and '60s Friedman’s voice was a minority because Keynes was very much in vogue both in academic circles and among practitioners, consultants and policy formulators.Keywords: Monetarism, Monetarist Policies, Short Run Phillips Curves, Vertical Long Run Phillips Curve, Natural Rate of Unemployment, Adaptive Expectations