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In old Chicago: Simons, Friedman and the development of monetary-policy rules

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  • George S. Tavlas

    ()
    (Bank of Greece)

Abstract

This paper examines the different policy rules proposed by Henry Simons, who, beginning in the mid-1930s, advocated a price-level stabilization rule, and by Milton Friedman, who, beginning in the late-1950s, advocated a rule that targeted a constant growth rate of the money supply. Although both rules shared the objective of eliminating the policy uncertainty emanating from discretion, they differed because of the different views of Simons and Friedman about the stability of secular relationships. Simons' rule relates to modern rules which emphasize the pursuit of price stability as representing optimal monetary policy.

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File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper2014177.pdf
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Bibliographic Info

Paper provided by Bank of Greece in its series Working Papers with number 177.

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Length: 35
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:bog:wpaper:177

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Web page: http://www.bankofgreece.gr
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Keywords: Milton Friedman; Henry Simons; monetary-policy rules;

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  1. Hugh Rockoff, 2000. "Henry Calvert Simons and the Quantity Theory of Money," Departmental Working Papers 200003, Rutgers University, Department of Economics.
  2. David Laidler & Roger Sandilands, 2002. "An Early Harvard Memorandum on Anti-Depression Policies: An Introductory Note," History of Political Economy, Duke University Press, vol. 34(3), pages 515-532, Fall.
  3. Laidler, David, 1993. "Hawtrey, Harvard, and the Origins of the Chicago Tradition," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1068-1103, December.
  4. Orphanides, Athanasios, 2000. "The quest for prosperity without inflation," Working Paper Series 0015, European Central Bank.
  5. Michael D. Bordo & Hugh Rockoff, 2011. "The Influence of Irving Fisher on Milton Friedman’s Monetary Economics," NBER Working Papers 17267, National Bureau of Economic Research, Inc.
  6. Friedman, Milton & Schwartz, Anna J, 1991. "Alternative Approaches to Analyzing Economic Data," American Economic Review, American Economic Association, vol. 81(1), pages 39-49, March.
  7. George S. Tavlas, 2011. "Two Who Called the Great Depression: An Initial Formulation of the Monetary‐Origins View," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 565-574, 03.
  8. Lothian, James R., 2009. "Milton Friedman's monetary economics and the quantity-theory tradition," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1086-1096, November.
  9. Henry C. Simons, 1944. "On Debt Policy," Journal of Political Economy, University of Chicago Press, vol. 52, pages 356.
  10. Friedman, Milton, 1972. "Comments on the Critics," Journal of Political Economy, University of Chicago Press, vol. 80(5), pages 906-50, Sept.-Oct.
  11. Tavlas, George S., 1981. "Keynesian and monetarist theories of the monetary transmission process : Doctrinal aspects," Journal of Monetary Economics, Elsevier, vol. 7(3), pages 317-337.
  12. Lauchlin Currie, 1978. "Comments and Observations," History of Political Economy, Duke University Press, vol. 10(4), pages 541-548, Winter.
  13. George S. Tavlas, 1998. "Was the Monetarist Tradition Invented?," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 211-222, Fall.
  14. Patinkin, Don, 1969. "The Chicago Tradition, the Quantity Theory, and Friedman," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 46-70, February.
  15. Thomas M. Humphrey, 1997. "Fisher and Wicksell on the quantity theory," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 71-90.
  16. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867-1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, May.
  17. Patinkin, Don, 1979. "Keynes and Chicago," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 213-32, October.
  18. Gauti B. Eggertsson & Michael Woodford, 2003. "Optimal Monetary Policy in a Liquidity Trap," NBER Working Papers 9968, National Bureau of Economic Research, Inc.
  19. Patinkin, Don, 1972. "Friedman on the Quantity Theory and Keynesian Economics," Journal of Political Economy, University of Chicago Press, vol. 80(5), pages 883-905, Sept.-Oct.
  20. Milton Friedman, 1951. "Commodity-Reserve Currency," Journal of Political Economy, University of Chicago Press, vol. 59, pages 203.
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