On the Endogeneity of Money Supply

James Tobin

Chapter 12 in Nicholas Kaldor and Mainstream Economics, 1991, pp 221-224 from Palgrave Macmillan

Abstract: Abstract Nicholas Kaldor gave superb testimony on monetarism to the Select Parliamentary Committee in 1980. There and elsewhere, he effectively criticized Milton Friedman’s empirical claims that Money causes Nominal Income. One of his criticisms was essentially econometric, namely that Friedman was using as evidence correlations over periods when central bank policies were accommodative. That is, the authorities were deliberately allowing money stocks to respond to income variations. Such correlations could not indicate what would have happened if the central banks had not been accommodative.1 Kaldor was surely right in making this econometric point. Of course, the fact that Friedman’s correlations don’t prove his case does not support any other proposition about the effects of non-accommodative policy.

Keywords: Interest Rate; Monetary Policy; Central Bank; Federal Reserve; Money Supply (search for similar items in EconPapers)
Date: 1991
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DOI: 10.1007/978-1-349-10947-0_12

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