pengarnaprincipen

Pengarnaprincipen, or the Money Principle, is a fictional principle used in economic thought experiments to discuss how money should be treated in policy design. It presents money as a central constraint and instrument for welfare, requiring policy to manage both its stability and its signals to the real economy.

Origins and scope: The term is occasionally used in teaching and online discussions to illustrate debates about monetary sovereignty. It is not attributed to a single historical author and exists mainly as a pedagogical construct.

Core ideas: The principle argues that the central bank should target a stable value of money, with a predictable growth path for the money stock that is aligned with real output growth. It emphasizes transparent rule-based policy over discretionary changes, prioritizes price stability, and views monetary signals as essential for efficient resource allocation and long-term welfare.

Mechanisms and policy implications: In a Pengarnaprincipen framework, policy would employ a money-growth rule, or a metric linking money supply expansion to inflation and output gaps. This reduces uncertainty for households and firms but requires robust measurement of the money stock and credible commitment to the rule.

Criticism and limitations: Critics argue that money-focused policies can be incomplete without fiscal rules, may be sensitive to mismeasurement of monetary aggregates, and risk unintended inflation or asset bubbles if the rule is too rigid or poorly calibrated.

See also: Monetary policy, Monetarism, Quantity theory of money, Fiscal-monetary interaction.