Milton Friedman's Contributions to Macroeconomics and Their Influence
AbstractMilton 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.
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Bibliographic InfoPaper provided by University of Western Ontario, Economic Policy Research Institute in its series University of Western Ontario, Economic Policy Research Institute Working Papers with number 20122.
Date of creation: 2012
Date of revision:
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Postal: Economic Policy Research Institute, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/epri_workingpapers.html
Friedman; macroeconomics; Keynes; Keynesianism; monetarism; money; inflation; cycle; depression; monetary policy; consumption;
Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-HIS-2012-07-23 (Business, Economic & Financial History)
- NEP-HPE-2012-07-23 (History & Philosophy of Economics)
- NEP-MAC-2012-07-23 (Macroeconomics)
- NEP-MON-2012-07-23 (Monetary Economics)
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