Monetarism is a school of thought in monetary economics that emphasizes the role of policy-makers in controlling the amount of money in circulation. It gained prominence in the 1970s but was mostly abandoned as a direct guidance to monetary policy during the following decade because of the rise of inflation targeting through movements of the official interest rate.
New Keynesian economics is a school of macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of new classical macroeconomics.
In economics and political science,fiscal policy is the use of government revenue collection and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variables developed in reaction to the Great Depression of the 1930s,when the previous laissez-faire approach to economic management became unworkable. Fiscal policy is based on the theories of the British economist John Maynard Keynes,whose Keynesian economics theorised that government changes in the levels of taxation and government spending influence aggregate demand and the level of economic activity. Fiscal and monetary policy are the key strategies used by a country's government and central bank to advance its economic objectives. The combination of these policies enables these authorities to target inflation and to increase employment. In modern economies,inflation is conventionally considered "healthy" in the range of 2%–3%. Additionally,it is designed to try to keep GDP growth at 2%–3% and the unemployment rate near the natural unemployment rate of 4%–5%. This implies that fiscal policy is used to stabilise the economy over the course of the business cycle.
Monetary economics is the branch of economics that studies the different theories of money:it provides a framework for analyzing money and considers its functions,and it considers how money can gain acceptance purely because of its convenience as a public good. The discipline has historically prefigured,and remains integrally linked to,macroeconomics. This branch also examines the effects of monetary systems,including regulation of money and associated financial institutions and international aspects.
Monetary policy is the policy adopted by the monetary authority of a nation to affect monetary and other financial conditions to accomplish broader objectives like high employment and price stability. Further purposes of a monetary policy may be to contribute to economic stability or to maintain predictable exchange rates with other currencies. Today most central banks in developed countries conduct their monetary policy within an inflation targeting framework,whereas the monetary policies of most developing countries' central banks target some kind of a fixed exchange rate system. A third monetary policy strategy,targeting the money supply,was widely followed during the 1980s,but has diminished in popularity since then,though it is still the official strategy in a number of emerging economies.
John Brian Taylor is the Mary and Robert Raymond Professor of Economics at Stanford University,and the George P. Shultz Senior Fellow in Economics at Stanford University's Hoover Institution.
Thomas John Sargent is an American economist and the W.R. Berkley Professor of Economics and Business at New York University. He specializes in the fields of macroeconomics,monetary economics,and time series econometrics. As of 2020,he ranks as the 29th most cited economist in the world. He was awarded the Nobel Memorial Prize in Economics in 2011 together with Christopher A. Sims for their "empirical research on cause and effect in the macroeconomy".
In macroeconomics,inflation targeting is a monetary policy where a central bank follows an explicit target for the inflation rate for the medium-term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability,and price stability is achieved by controlling inflation. The central bank uses interest rates as its main short-term monetary instrument.
Modern monetary theory or modern money theory (MMT) is a heterodox macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires. According to MMT,governments do not need to worry about accumulating debt since they can pay interest by printing money. MMT argues that the primary risk once the economy reaches full employment is inflation,which acts as the only constraint on spending. When MMT says that a major role of taxes is to help offset demand rather than generate revenue,it is recognizing that taxes are a critical part of a whole suite of potential demand offsets,which also includes things like tightening financial and credit regulations to reduce bank lending,market finance,speculation and fraud.
Quantitative easing (QE) is a monetary policy action where a central bank purchases predetermined amounts of government bonds or other financial assets in order to stimulate economic activity. Quantitative easing is a novel form of monetary policy that came into wide application after the 2007–2008 financial crisis. It is used to mitigate an economic recession when inflation is very low or negative,making standard monetary policy ineffective. Quantitative tightening (QT) does the opposite,where for monetary policy reasons,a central bank sells off some portion of its holdings of government bonds or other financial assets.
Dynamic stochastic general equilibrium modeling is a macroeconomic method which is often employed by monetary and fiscal authorities for policy analysis,explaining historical time-series data,as well as future forecasting purposes. DSGE econometric modelling applies general equilibrium theory and microeconomic principles in a tractable manner to postulate economic phenomena,such as economic growth and business cycles,as well as policy effects and market shocks.
James Brian Bullard is the former chief executive officer and 12th president of the Federal Reserve Bank of St. Louis,a position he held from 2008 until August 14,2023. In July 2023,he was named dean of the Mitchell E. Daniels Jr. School of Business at Purdue University.
The fiscal theory of the price level is the idea that government fiscal policy,including debt and taxes present and future,is the primary determinant of the price level or inflation as opposed to the quantity theory of money. The theory is one of the strongest advocates in the debate among mainstream economists for combatting inflation primarily through fiscal policy instead of monetary policy. The theory also disputes the premise of Modern Monetary Theory that inflation can be controlled when it starts to rise.
Macroeconomic theory has its origins in the study of business cycles and monetary theory. In general,early theorists believed monetary factors could not affect real factors such as real output. John Maynard Keynes attacked some of these "classical" theories and produced a general theory that described the whole economy in terms of aggregates rather than individual,microeconomic parts. Attempting to explain unemployment and recessions,he noticed the tendency for people and businesses to hoard cash and avoid investment during a recession. He argued that this invalidated the assumptions of classical economists who thought that markets always clear,leaving no surplus of goods and no willing labor left idle.
The new neoclassical synthesis (NNS),which is occasionally referred as the New Consensus,is the fusion of the major,modern macroeconomic schools of thought –new classical macroeconomics/real business cycle theory and early New Keynesian economics –into a consensus view on the best way to explain short-run fluctuations in the economy. This new synthesis is analogous to the neoclassical synthesis that combined neoclassical economics with Keynesian macroeconomics. The new synthesis provides the theoretical foundation for much of contemporary mainstream macroeconomics. It is an important part of the theoretical foundation for the work done by the Federal Reserve and many other central banks.
Scott B. Sumner is an American economist. He was previously the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University,a Research Fellow at the Independent Institute,and a professor at Bentley University in Waltham,Massachusetts. His economics blog,The Money Illusion,popularized the idea of nominal GDP targeting,which says that the Federal Reserve and other central banks should target nominal GDP,real GDP growth plus the rate of inflation,to better "induce the correct level of business investment".
Richard Harris Clarida is an American economist who served as the 21st Vice Chair of the Federal Reserve from 2018 to 2022. Clarida resigned his post on January 14,2022,to return from public service leave to teach at Columbia University for the spring term of 2022. He is the C. Lowell Harriss Professor of Economics and International Affairs at Columbia University and,from 2006 until September 2018 and from October 2022 to the present,a Global Strategic Advisor for PIMCO. He is notable for his contributions to dynamic stochastic general equilibrium theory and international monetary economics. He is a former Assistant Secretary of the Treasury for Economic Policy and is a recipient of the Treasury Medal. He also was a proponent of the theory that inflation was transitory during the COVID-19 pandemic.
Market monetarism is a school of macroeconomics that advocates that central banks use a nominal GDP level target instead of inflation,unemployment,or other measures of economic activity,with the goal of mitigating demand shocks such those experienced in the 2007–2008 financial crisis and during the post-pandemic inflation surge. Market monetarists criticize the fallacy that low interest rates always correspond to easy money. Market monetarists are sceptical about fiscal stimulus,noting that it is usually offset by monetary policy.
Thomas MacGillivray Humphrey was an American economist. Until 2005 he was a research advisor and senior economist in the research department of the Federal Reserve Bank of Richmond and editor of the bank's flagship publication,the Economic Quarterly. His publications cover macroeconomics,monetary economics,and the history of economic thought. Mark Blaug called him the "undisputed master" of British classical monetary thought.
Sudhakar Rao Aiyagari was an Indian-born economics professor at the University of Rochester. He had previous been a leading research economist at the Minneapolis Fed,prior to which he had taught,in the 1980s,at New York University,University of Wisconsin,Madison,and Carnegie-Mellon University in Pittsburgh.
