The Importance of Stability in Monetary Growth
At the David Laidler Festschrift, Milton Friedman presented (via video conference) a very straight-forward paper on the Taylor Curve (the theory that there is a trade-off between the variability of the money supply and the variability in output). He presented this graph:
and concluded:
Chart 3 brings out the sharp break between the period up to the end of the 1970s and the rest of the period. The collapse of the variability of output is clearly an effect of the collapse of monetary variability. In my opinion, the same results could have been obtained at any earlier time and can continue to be achieved in the future. What is involved is not a tradeoff but direct cause-effect.
and concluded:
Chart 3 brings out the sharp break between the period up to the end of the 1970s and the rest of the period. The collapse of the variability of output is clearly an effect of the collapse of monetary variability. In my opinion, the same results could have been obtained at any earlier time and can continue to be achieved in the future. What is involved is not a tradeoff but direct cause-effect.
Category: Economics, Macroeconomics, Money Posted on
Monday, August 21, 2006 at 9:15am
<< main
