The Role of Monetary Policy.¶
Friedman, M. (1968). The Role of Monetary Policy. American Economic Review, 58(1), 1-17.
Cited by¶
5 citations across 5 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Crowding Out
- Public spending displacing private investment looks like spending displacing investment "despite there being more activity," because the substrate — the pool of loanable funds and the interest rate that clears it — is the unattended channel.
This sourcePresidential address framing how government action operates through the interest-rate channel; supports the displacement-through-an-unattended-channel point.
- Public spending displacing private investment looks like spending displacing investment "despite there being more activity," because the substrate — the pool of loanable funds and the interest rate that clears it — is the unattended channel.
- Irreducible Floor
- Labour economics: the natural rate of unemployment (NAIRU) — the rate below which monetary expansion does not reduce unemployment further but does generate inflation; the floor is structural (matching frictions, sectoral mismatch, search costs) and monetary policy is the intra-regime lever.
This sourceIntroduces the natural rate of unemployment: a structural floor set by labor-market frictions below which monetary expansion generates inflation rather than lower unemployment.
Supported in partVerified against the work's full text
Friedman defines a structural natural rate (market imperfections, information and mobility costs) that monetary expansion can undercut only via accelerating inflation; no NAIRU, sectoral mismatch, or policy lever.
“provided there is imbedded in them the actual struc- tural characteristics of the labor and commodity markets, including market imperfections, stochastic variability in demands and supplies, the cost of gathering information about job vacancies and labor avail- abilities, the costs of mobility, and so on.”
- Labour economics: the natural rate of unemployment (NAIRU) — the rate below which monetary expansion does not reduce unemployment further but does generate inflation; the floor is structural (matching frictions, sectoral mismatch, search costs) and monetary policy is the intra-regime lever.
- Latency
- Because policy acts on the economy with long and variable lags, policymakers are perpetually steering by a delayed image of conditions, a structural reason monetary policy tends to overshoot.
This sourcePresidential address establishing that monetary policy acts on the economy with long and variable lags, so policymakers steer on a delayed image of conditions, a structural source of overshoot.
Supported in partVerified against the work's full text
Friedman locates the cause of repeated monetary overshooting in "the failure of monetary authorities to allow for the delay between their actions and the subsequent effects on the economy": they "tend to determine their actions by today's conditions", while those actions reach the economy "only six or nine or twelve or fifteen months later". Steering on a delayed picture of conditions, and the overshoot it produces, is what the sentence attributes to him. The phrase long and variable lags is not the work's wording, and it places the cause of overshoot in the authorities' failure to allow for the delay rather than in the delay itself.
“The reason for the propensity to overreact seems clear: the failure of monetary authorities to allow for the delay between their actions and the subsequent effects on the economy.”
- Because policy acts on the economy with long and variable lags, policymakers are perpetually steering by a delayed image of conditions, a structural reason monetary policy tends to overshoot.
Domain-specific¶
- Aggregate Supply
- The expectations-augmented Phillips-curve linkage means that workers' and firms' beliefs about future inflation enter directly into wage-setting and pricing decisions, making anticipated monetary policy a determinant of curve position
This sourceFriedman's natural-rate argument that wage- and price-setters build anticipated inflation into their decisions.
Supported in partVerified against a saved copy of the source
“in nominal {{{wages}}} will be less rapid than the rise in anticipated nominal {{{wages}}} to make allowance”
- The expectations-augmented Phillips-curve linkage means that workers' and firms' beliefs about future inflation enter directly into wage-setting and pricing decisions, making anticipated monetary policy a determinant of curve position
- Phillips Curve
- Friedman (1968) and Phelps (1967) introduced the expectations-augmented version
Supported in partVerified against a saved copy of the source
“there is always a temporary trade-off between inflation and unemployment; there is no permanent”
- Friedman (1968) and Phelps (1967) introduced the expectations-augmented version
Verification¶
Does it exist? Not checked yet. This entry carries no identifier to resolve. It was extracted from the citation as written in the article, normalized, and deduplicated against the rest of the registry.
Does it back the claim? Read against the text for 4 of 5 citations: 4 supported in part. Each verdict is shown under its citation below, with what in the work backs the sentence.
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