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Milton Friedman's Contributions to Macroeconomics and Their Influence

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Abstract

Milton Friedman's contributions to and influence on macroeconomics are discussed, beginning with his work on the consumption function and the demand for money, not to mention monetary history, which helped to undermine the post World War 2 "Keynesian" consensus in the area. His inter-related analyses of the dynamics of monetary policy's transmission mechanism, the case for a money growth rule, and the expectations augmented Phillips curve are then taken up, followed by a discussion of his influence not only directly on the monetarist policy experiments of the early 1980s, but also less directly on the regimes that underlay the "great moderation" that broke down in the crisis of 2007-2008. Friedman's seminal influence on the development of today's mainstream, stochastic, but essentially Walrasian, macroeconomic theory, rooted in his explicit deployment of econometric theory in the analysis of forward-looking maximising behaviour in 1957, and in his later work on the Phillips curve, is also assessed in the light of his own preference, which he shared with Keynes, for a pragmatic Marshallian approach to economic theorising.

Suggested Citation

  • David Laidler, 2012. "Milton Friedman's Contributions to Macroeconomics and Their Influence," University of Western Ontario, Economic Policy Research Institute Working Papers 20122, University of Western Ontario, Economic Policy Research Institute.
  • Handle: RePEc:uwo:epuwoc:20122
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    File URL: https://ir.lib.uwo.ca/cgi/viewcontent.cgi?article=1062&context=economicsepri_wp
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Friedman y el euro
      by miguel navascues in La decadencia de Occidente on 2012-09-04 05:57:00

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    Cited by:

    1. David Laidler, 2018. "Why the fuss? Friedman (1968) after 50 years," Review of Keynesian Economics, Edward Elgar Publishing, vol. 6(4), pages 437-445, October.
    2. George S. Tavlas, 2022. "Milton Friedman and the road to monetarism: a review essay," Working Papers 307, Bank of Greece.
    3. Johannes A. Schwarzer, 2012. "A.W. Phillips and his curve: Stabilisation policies, inflation expectations and the ‘menu of choice’," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 19(6), pages 976-1003, December.

    More about this item

    Keywords

    Friedman; macroeconomics; Keynes; Keynesianism; monetarism; money; inflation; cycle; depression; monetary policy; consumption;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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