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Krugman Versus Friedman: Monetary Policy, 1929–1933, A Note

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  • Robert F. Stauffer

Abstract

In a retrospective on Milton Friedman, Paul Krugman is critical of Friedman's remarks on monetary base changes in the early years of the Great Depression. Krugman emphasizes that the monetary base did increase by about one billion dollars from 1929–1933, thereby implying the Fed was pursuing an expansionary policy. The purpose of this comment is to clarify monetary base analysis in this period. More specifically, two common misconceptions in regard to the monetary base are discussed: first, that changes in the base are a reliable indicator of the stance of Fed policy, and secondly that the Federal Reserve exercises absolute control over changes in the base.

Suggested Citation

  • Robert F. Stauffer, 2010. "Krugman Versus Friedman: Monetary Policy, 1929–1933, A Note," The American Economist, Sage Publications, vol. 55(1), pages 132-134, May.
    • Handle: RePEc:sae:amerec:v:55:y:2010:i:1:p:132-134
    DOI: 10.1177/056943451005500114
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    References listed on IDEAS

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    1. 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.
    2. Lall Ramrattan & Michael Szenberg, 2008. "Memorializing Milton Friedman: A Review of His Major Works, 1912–2006," The American Economist, Sage Publications, vol. 52(1), pages 23-38, March.
    3. Friedman, Milton, 2008. "Milton Friedman on Economics," University of Chicago Press Economics Books, University of Chicago Press, number 9780226263496, September.
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    Cited by:

    1. Maciej Ryczkowski, 2015. "Ewolucja pogladow Miltona Friedmana, a ocena polityki pienieznej Fed i EBC w okresie kryzysu finansowego," Working Papers 168/2015, Institute of Economic Research, revised Dec 2015.

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