—monetarist, n., adj./mon"i teuh riz'euhm, mun"-/, n. Econ.a doctrine holding that changes in the money supply determine the direction of a nation's economy.[1965-70, Amer.; MONETAR(Y) + -ISM]
* * *School of economic thought that maintains that the money supply is the chief determinant of economic activity.Milton Friedman and his followers promoted monetarism as an alternative to Keynesian economics (see John Maynard Keynes); their economic theories became influential in the 1970s and early 1980s. Monetarism holds that a change in the money supply directly affects and determines production, employment, and price levels, though its influence is evident only over a long and often variable period of time. Fundamental to the monetarist approach is the rejection of fiscal policy in favour of "monetary rule." Friedman and others asserted that fiscal measures such as tax-policy changes or increased government spending have little significant effect on the fluctuations of the business cycle. They argued that government intervention in the economy should be kept to a minimum and asserted that economic conditions would change before specific policy measures designed to address them could take effect. Steady, moderate growth of the money supply, in their view, offered the best hope of assuring a constant rate of economic growth with low inflation. U.S. economic performance in the 1980s cast doubts on monetarism, and the proliferation of new types of bank deposits made it difficult to calculate the money supply.
* * *school of economic (economics) thought that maintains that the money supply (the total amount of money in an economy, in the form of coin, currency, and bank deposits) is the chief determinant on the demand side of short-run economic activity. American economist Milton Friedman (Friedman, Milton) is generally regarded as monetarism's leading exponent. Friedman and other monetarists advocate a macroeconomic (macroeconomics) theory and policy that diverge significantly from those of the formerly dominant Keynesian (Keynesian economics) school. The monetarist approach became influential during the 1970s and early '80s.Underlying the monetarist theory is the equation of exchange, which is expressed as MV = PQ. Here M is the supply of money, and V is the velocity of turnover of money (i.e., the number of times per year that the average dollar in the money supply is spent for goods and services), while P is the average price level at which each of the goods and services is sold, and Q represents the quantity of goods and services produced.The monetarists believe that the direction of causation is from left to right in the equation; that is, as the money supply increases with a constant and predictable V, one can expect an increase in either P or Q. An increase in Q means that P will remain relatively constant, while an increase in P will occur if there is no corresponding increase in the quantity of goods and services produced. In short, a change in the money supply directly affects and determines production, employment, and price levels. The effects of changes in the money supply, however, become manifest only after a significant period of time.One monetarist policy conclusion is the rejection of fiscal policy in favour of a “monetary rule.” In A Monetary History of the United States 1867–1960 (1963), Friedman, in collaboration with Anna J. Schwartz, presented a thorough analysis of the U.S. money supply from the end of the Civil War to 1960. This detailed work influenced other economists to take monetarism seriously.Friedman contended that the government should seek to promote economic stability, but only by controlling the rate of growth of the money supply. It could achieve this by following a simple rule that stipulates that the money supply be increased at a constant annual rate tied to the potential growth of gross domestic product (GDP) and expressed as a percentage (e.g., an increase from 3 to 5 percent).Monetarism thus posited that the steady, moderate growth of the money supply could in many cases ensure a steady rate of economic growth with low inflation. Monetarism's linking of economic growth with rates of increase of the money supply was proved incorrect, however, by changes in the U.S. economy during the 1980s. First, new and hybrid types of bank deposits obscured the kinds of savings that had traditionally been used by economists to calculate the money supply. Second, a decline in the rate of inflation caused people to spend less, which thereby decreased velocity (V). These changes diminished the ability to predict the effects of money growth on growth of nominal GDP.
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monetarism — mon‧e‧ta‧ris‧m [ˈmʌntərɪzm ǁ ˈmɑː ] noun [uncountable] ECONOMICS the idea that an economy can be controlled by its central bank influencing the money supply (= amount of money in the economy at a particular time). For example, the central bank… … Financial and business terms
monetarism — mon e*tar*ism, n. An economic theory holding that the rate of growth of the money supply is the priunciple cause of changes in inflation, economic growth, and unemployment. [PJC] … The Collaborative International Dictionary of English
monetarism — MONETARÍSM s. n. teorie şi politică ce atribuie modificării masei banilor în circulaţie o importanţă centrală, chiar decisivă, în procesul activităţii economice şi în stabilirea nivelului preţurilor. (după germ. Monetarsystem) Trimis de raduborza … Dicționar Român
monetarism — monetarism, monetarist, monetary These are pronounced with the first syllable as mun in BrE and as mon in AmE … Modern English usage
monetarism — ► NOUN ▪ the theory that inflation is best controlled by limiting the supply of money circulating in an economy. DERIVATIVES monetarist noun & adjective … English terms dictionary
monetarism — ☆ monetarism [män′ə tər iz΄əm ] n. a theory which holds that economic stability and growth result from maintaining a steady rate of growth in the supply of money … English World dictionary
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monetarism — An economic policy associated with Milton Friedman and his Chicago school that suggests that government should minimise its involvement in economic policy, except for controlling the money supply as a means of defeating inflation. Inflation is … Glossary of UK Government and Politics