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In Old Chicago: Simons, Friedman, and the Development of Monetary‐Policy Rules
Author(s) -
TAVLAS GEORGE S.
Publication year - 2015
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12170
Subject(s) - discretion , economics , monetary policy , keynesian economics , monetarism , price of stability , stability (learning theory) , money supply , deflation , mathematical economics , law , political science , computer science , machine learning
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 that emphasize the pursuit of price stability as representing optimal monetary policy.