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Contribution of Monetarism in Macroeconomic Policy

Contribution of Monetarism in Macroeconomic Policy . Supply of money is the determinant of the national income In the long run, the influence of money is primarily on the price level and other nominal magnitudes. Real output and employment are not determined by monetary factors.

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Contribution of Monetarism in Macroeconomic Policy

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  1. Contribution of Monetarism in Macroeconomic Policy • Supply of money is the determinant of the national income • In the long run, the influence of money is primarily on the price level and other nominal magnitudes. Real output and employment are not determined by monetary factors. • In the short run the supply of money does affect the output. Money is the dominant factor in causing cyclical fluctuations in output and employment in the short run. • Private sector is inherently stable and instability is primarily the result of the government policy. Macroeconomic Themes:3

  2. Policy conclusions • Stability in the growth rate of money supply is crucial for a stable economy. Monetarists favour a constant money growth rate policy rule rather than discretion. • Fiscal policy does not have any systematic impact on real or nominal income. Macroeconomic Themes:3

  3. The basic mechanism of money supply Macroeconomic Themes:3

  4. The basic mechanism of money supply Macroeconomic Themes:3

  5. Money Supply Macroeconomic Themes:3

  6. Money Demand Macroeconomic Themes:3

  7. Friedman (1968) on Monetary Policy Macroeconomic Themes:3

  8. Natural Rate Hypothesis Macroeconomic Themes:3

  9. A brief story of monetary policy in the UK and the EU Macroeconomic Themes:3

  10. Macroeconomic Themes:3

  11. Macroeconomic Themes:3

  12. How does the Bank of England forecast the inflation? Macroeconomic Themes:3

  13. Transmission Mechanisms of Monetary Policy-Bank of England’s View Macroeconomic Themes:3

  14. Bank of England’s Fan Chart Percentage increase in prices on a year earlier B&W Figure 9.7 Source: Inflation Report, Bank of England, November 2000 Macroeconomic Themes:3

  15. Effects of Changes in the Rate of Interest Macroeconomic Themes:3

  16. Simple Policy Reaction Function: An Example of Interest Determination Rule Macroeconomic Themes:3

  17. Simple Policy Reaction Function: An Example of Interest Determination Rule Macroeconomic Themes:3

  18. Does Policy Work? Lags and demand management policy Bamplified cycle Businesscycle Output Asmoother cycle Macroeconomic Themes:3 Time

  19. Monetarist’s View on Impact of Monetary and Fiscal Policies Macroeconomic Themes:3

  20. Monetary Policy Instruments Macroeconomic Themes:3

  21. Interest Rate Determination Model: Actual and Predicted Series Macroeconomic Themes:3

  22. Prediction using a Simple Model Macroeconomic Themes:3

  23. References Macroeconomic Themes:3

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