ABSTRACT
Like beauty, ‘monetarism’ tends to lie in the eye of the beholder, and before it can be assessed it must be defined. Though there have been several valuable attempts over the years to specify monetarism’s key characteristics,1
I shall not rely upon them in this chapter. Each of them has been heavily conditioned by its time and place of writing, and monetarism has evolved over the years in response to changing circumstances, and in different ways in different places, as new hypotheses have either been developed or absorbed. Thus, I will begin this chapter with my own characterisation of monetarism. In my view, the key characteristics of monetarism are as follows:
1 A ‘quantity theory’ approach to macroeconomic analysis in two distinct senses: (a) that used by Milton Friedman (1956) to describe a theory of the demand for money, and (b) the more traditional sense of a view that fluctuations in the quantity of money are the dominant cause of fluctuations in money income.
