Revisiting Friedman's Extended Monetary Framework. The Monetary Theory of Nominal Income

Victor Olivo

MPRA Paper from University Library of Munich, Germany

Abstract: This document revisits Milton Friedman's extended monetary framework, specifically focusing on his Monetary Theory of Nominal Income. Friedman’s extended monetary framework remains robust in explaining the dynamic relationship between money supply changes and nominal income fluctuations over more than 150 years of U.S. data. Despite major economic events, this relationship has been stable and significant. The empirical analysis with more recent data continues supporting Friedman's contention that money plays a special role in macroeconomic dynamics, stronger than fiscal variables or interest rates. The methodological debate between Friedman and his critics underscores the importance of empirical causality and practical explanatory power in economic theory. The document concludes that Friedman’s Marshallian approach offers valuable insights that have endured and continue to inform monetary economics.

Keywords: Quantity Theory; Income-Expenditure Model; Price Level; Inflation; Nominal Income; Money Supply; Causality; Dynamic Models; Time Series Models. (search for similar items in EconPapers)
JEL-codes: E00 E31 E51 E52 (search for similar items in EconPapers)
Date: 2025-08-10, Revised 2025-08-10
New Economics Papers: this item is included in nep-his, nep-hpe, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:125716

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