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Reflections on Milton Friedman's contributions to open economy money/macro

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  • Boyer, Russell S.

Abstract

Friedman's central contributions to open economy macroeconomics are contained in his essay "The Case for Flexible Exchange Rates." The paper describes equilibrium in an open economy in terms of the flow market for domestic currency, and so presents the basic elements of The Monetary Approach to the Balance of Payments, which Mundell and Johnson developed later in the decade. An application of the argument includes the first definitive statement of the criteria which one finds in the literature on Optimum Currency Areas. The essay's model, in a better specified, more modern form, reappears in A Monetary History (with Anna Schwartz), where it serves as a basis for detailed analysis of particular episodes and as a framework for empirical work which continues to this day.

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  • Boyer, Russell S., 2009. "Reflections on Milton Friedman's contributions to open economy money/macro," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1097-1116, November.
    • Handle: RePEc:eee:jimfin:v:28:y:2009:i:7:p:1097-1116
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    References listed on IDEAS

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    1. Dellas, Harris & Tavlas, George S., 2009. "An optimum-currency-area odyssey," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1117-1137, November.
    2. Maurice Obstfeld, 2001. "International Macroeconomics: Beyond the Mundell-Fleming Model," NBER Working Papers 8369, National Bureau of Economic Research, Inc.
    3. Friedman, Milton, 1992. "Franklin D. Roosevelt, Silver, and China," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 62-83, February.
    4. Robert A. Mundell, 1960. "The Monetary Dynamics of International Adjustment under Fixed and Flexible Exchange Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 74(2), pages 227-257.
    5. David Laidler & William B.P. Robson, 2004. "Two Percent Target: The Context, Theory, and Practice of Canadian Monetary Policy since 1991," C.D. Howe Institute Policy Studies, C.D. Howe Institute, number 20041, January.
    6. Paul Hallwood, C. & MacDonald, Ronald & Marsh, Ian W., 2000. "Realignment expectations and the US dollar, 1890-1897: Was there a 'Peso problem'?," Journal of Monetary Economics, Elsevier, vol. 46(3), pages 605-620, December.
    7. Milton Friedman, 1951. "Commodity-Reserve Currency," Journal of Political Economy, University of Chicago Press, vol. 59(3), pages 203-203.
    8. 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, June.
    9. Milton Friedman & Anna J. Schwartz, 1982. "Monetary Trends in the United States and United Kingdom: Their Relation to Income, Prices, and Interest Rates, 1867–1975," NBER Books, National Bureau of Economic Research, Inc, number frie82-2, June.
    10. S. J. Prais, 1961. "Some Mathematical Notes on the Quantity Theory of Money in an Open Economy," IMF Staff Papers, Palgrave Macmillan, vol. 8(2), pages 212-226, May.
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    12. Harry G. Johnson, 1969. "The case for flexible exchange rates, 1969," Review, Federal Reserve Bank of St. Louis, vol. 51(June), pages 12-24.
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    14. Nelson, Edward & Schwartz, Anna J., 2008. "The impact of Milton Friedman on modern monetary economics: Setting the record straight on Paul Krugman's "Who was Milton Friedman?"," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 835-856, May.
    15. Nicholas Kaldor, 1939. "Speculation and Economic Stability," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 7(1), pages 1-27.
    16. Rudolf R. Rhomberg, 1964. "A Model of the Canadian Economy Under Fixed and Fluctuating Exchange Rates," Journal of Political Economy, University of Chicago Press, vol. 72(1), pages 1-1.
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    18. Friedman, Milton, 2008. "Milton Friedman on Economics," University of Chicago Press Economics Books, University of Chicago Press, number 9780226263496, June.
    19. Alexander K. Swoboda, 1972. "Equilibrium, Quasi-Equilibrium, and Macroeconomic Policy under Fixed Exchange Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(1), pages 162-171.
    20. Friedman, Milton, 1990. "The Crime of 1873," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1159-1194, December.
    21. Rudiger Dornbusch & Paul Krugman, 1976. "Flexible Exchange Rates in the Short Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(3), pages 537-584.
    22. Lothian, James R & Taylor, Mark P, 1996. "Real Exchange Rate Behavior: The Recent Float from the Perspective of the Past Two Centuries," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 488-509, June.
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    24. Filippo Cesarano, 2006. "The Origins of the Theory of Optimum Currency Areas," History of Political Economy, Duke University Press, vol. 38(4), pages 711-731, Winter.
    25. Egon Sohmen, 1957. "Demand Elasticities and the Foreign-Exchange Market," Journal of Political Economy, University of Chicago Press, vol. 65(5), pages 431-431.
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    Cited by:

    1. Filippo Cesarano, 2013. "The Optimum Currency Area Puzzle," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(3), pages 259-271, August.
    2. Mogaji, Peter Kehinde, 2023. "Long Run Money Superneutrality Evaluation of the Relevance of Money in Africa: An ARDL Approach," MPRA Paper 120181, University Library of Munich, Germany, revised 07 Sep 2023.
    3. 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.
    4. Mogaji, Peter Kehinde, 2016. "Inflation Deviations Assessments of OCA Properties in the WAMZ," MPRA Paper 98825, University Library of Munich, Germany.
    5. Mogaji, Peter Kehinde, 2016. "Monetary Integration Tests for the OCA’s Business Cycles Synchronicity Criteria in the WAMZ," MPRA Paper 99066, University Library of Munich, Germany.
    6. Douglas A. Irwin, 2017. "The Missing Bretton Woods Debate over Flexible Exchange Rates," NBER Working Papers 23037, National Bureau of Economic Research, Inc.
    7. Mogaji, Peter Kehinde, 2018. "ARDL Bounds Tests for Neutrality and Superneutrality of Money towards Monetary Integration of West Africa," MPRA Paper 98741, University Library of Munich, Germany.

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