monetaristas

Monetaristas, or monetarists, are economists who emphasize the importance of a country's money supply in influencing nominal variables such as prices, inflation, and output. They argue that monetary policy is the primary tool for stabilizing the economy over the medium to long run, and that fiscal policy is less effective or more distortionary than commonly assumed.

Core ideas common to monetarists include the quantity theory of money, typically expressed as MV = PY, where M is the money supply, V is the velocity of money, P is the price level, and Y is real output. They often contend that in the long run the growth rate of money tends to determine inflation, while real variables such as employment are determined by real factors and tend toward a natural rate. This leads to a belief in policy rules—such as a steady, predictable growth rate of the money supply—over discretionary, activist interventions.

Historically associated with the Chicago School and figures like Milton Friedman, monetarism rose to prominence in the 1950s–1970s and influenced monetary policy discourse in many countries. Friedman and coauthors argued that gradual, predictable money growth could reduce inflation without sacrificing real growth, though real-world outcomes and velocity changes challenged some assumptions. The monetarist critique contributed to shifts in policy debates, including emphasis on anti-inflation credibility and rule-based approaches, and intersected with the rise of new classical economics.

Critics argue that money demand is unstable, that policy rules can be time-inconsistent, and that monetary policy alone cannot fully address all economic fluctuations. Over time, monetary theory evolved toward more nuanced frameworks, incorporating expectations and financial factors, while the core insight remains the significant, though not exclusive, role of monetary conditions in inflation. See also monetarism and macroeconomic policy.