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The Impact of Milton Friedman on Modern Monetary Economics: Setting the Record Straight on Paul Krugman's "Who Was Milton Friedman?"

  • Edward Nelson
  • Anna J. Schwartz

Paul Krugman's essay "Who Was Milton Friedman?" seriously mischaracterizes Friedman's economics and his legacy. In this paper we provide a rejoinder to Krugman on these issues. In the course of setting the record straight, we provide a self-contained guide to Milton Friedman's impact on modern monetary economics and on today's central banks. We also refute the conclusions that Krugman draws about monetary policy from the experiences of the United States in the 1930s and of Japan in the 1990s.

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File URL: http://www.nber.org/papers/w13546.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13546.

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Date of creation: Oct 2007
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Publication status: published as 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.
Handle: RePEc:nbr:nberwo:13546
Note: ME
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  1. Michael D. Bordo & Anna J. Schwartz, 2004. "IS-LM and Monetarism," History of Political Economy, Duke University Press, vol. 36(5), pages 217-239, Supplemen.
  2. Michael Woodford, 2007. "How Important is Money in the Conduct of Monetary Policy?," NBER Working Papers 13325, National Bureau of Economic Research, Inc.
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  4. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
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  7. Friedman, Milton, 1972. "Comments on the Critics," Journal of Political Economy, University of Chicago Press, vol. 80(5), pages 906-50, Sept.-Oct.
  8. Friedman, Milton, 1986. "The Resource Cost of Irredeemable Paper Money," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 642-47, June.
  9. Friedman, Milton, 1972. "Have Monetary Policies Failed?," American Economic Review, American Economic Association, vol. 62(2), pages 11-18, May.
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  12. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-72, June.
  13. Robert G. King & Alexander L. Wolman, 1996. "Inflation Targeting in a St. Louis Model of the 21st Century," NBER Working Papers 5507, National Bureau of Economic Research, Inc.
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  15. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
  16. Darryl R. Francis, 1974. "Inflation, recession - what's a policymaker to do?," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-7.
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  18. Bennett T. McCallum, 1985. "Monetary vs. Fiscal Policy Effects: A Review of the Debate," NBER Working Papers 1556, National Bureau of Economic Research, Inc.
  19. Frederic S. Mishkin, 2007. "Will Monetary Policy Become More of a Science?," NBER Working Papers 13566, National Bureau of Economic Research, Inc.
  20. Krugman, Paul, 2000. "Thinking About the Liquidity Trap," Journal of the Japanese and International Economies, Elsevier, vol. 14(4), pages 221-237, December.
  21. Friedman, Milton, 1971. "A Monetary Theory of Nominal Income," Journal of Political Economy, University of Chicago Press, vol. 79(2), pages 323-37, March-Apr.
  22. Benjamin M. Friedman, 1978. "Crowding Out or Crowding In? Economic Consequences of Financing Government Deficits," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 9(3), pages 593-641.
  23. Friedman, Benjamin M, 1978. "Who Puts the Inflation Premium into Nominal Interest Rates?," Journal of Finance, American Finance Association, vol. 33(3), pages 833-45, June.
  24. Christina D. Romer, 1993. "The Nation in Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 19-39, Spring.
  25. Hiroshi Ugai, 2007. "Effects of the Quantitative Easing Policy: A Survey of Empirical Analyses," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 25(1), pages 1-48, March.
  26. Milton Friedman & Anna Jacobson Schwartz, 1970. "Monetary Statistics of the United States: Estimates, Sources, Methods," NBER Books, National Bureau of Economic Research, Inc, number frie70-1, May.
  27. Julio Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361 National Bureau of Economic Research, Inc.
  28. Taylor, John B., 1981. "On the relation between the variability of inflation and the average inflation rate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 15(1), pages 57-85, January.
  29. Benjamin M. Friedman, 1978. "Who Puts the Inflation Premium Into Nominal Interests Rates?," NBER Working Papers 0231, National Bureau of Economic Research, Inc.
  30. John B. Taylor, 1998. "Monetary policy and the long boom," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-12.
  31. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  32. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
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