The Role of Financial Policy

Roger Farmer

No 12825, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: I review the contribution and influence of Milton Friedman’s 1968 presidential address to the American Economic Association. I argue that Friedman’s influence on the practice of central banking was profound and that his arguments in favour of monetary rules was responsible for thirty years of low and stable inflation in the period from 1979 through 2009. I present a critique of Friedman’s position that market-economies are self-stabilizing and I describe an alternative reconciliation of Keynesian economics with Walrasian general equilibrium theory from that which is widely accepted today by most neo-classical economists. My interpretation implies that government should intervene actively in financial markets to stabilize economic activity.

Keywords: Keynesian economics; Monetarism; Natural rate of unemployment (search for similar items in EconPapers)
JEL-codes: E3 E4 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-his, nep-mac and nep-mon
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Journal Article: The role of financial policy (2018)
Working Paper: The Role of Financial Policy (2018)
Working Paper: The Role of Financial Policy (2018)
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