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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.

Suggested Citation

  • George S. Tavlas, 2014. "In old Chicago: Simons, Friedman and the development of monetary-policy rules," Working Papers 177, Bank of Greece.
  • Handle: RePEc:bog:wpaper:177
    as

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    References listed on IDEAS

    as
    1. George S. Tavlas, 1998. "Was the Monetarist Tradition Invented?," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 211-222, Fall.
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    3. Hetzel,Robert L., 2012. "The Great Recession," Cambridge Books, Cambridge University Press, number 9781107011885, April.
    4. Orphanides, Athanasios, 2003. "The quest for prosperity without inflation," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 633-663, April.
    5. 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, March.
    6. Edward Nelson, 2008. "Friedman and Taylor on monetary policy rules: a comparison," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 95-116.
    7. Milton Friedman, 1951. "Commodity-Reserve Currency," Journal of Political Economy, University of Chicago Press, vol. 59, pages 203-203.
    8. 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.
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    10. Patinkin, Don, 1979. "Keynes and Chicago," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 213-232, October.
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    More about this item

    Keywords

    Milton Friedman; Henry Simons; monetary-policy rules;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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