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MONETARISM

An economic theory advocating that governments use interest rates and control of the supply of money for the purpose of economic regulation. This is in contrast to Keynsian economics which advocates taxation and budgetary (‘fiscal’) policy . Use of monetary instruments for economic regulation is said to provide a lever to influence macro-economic cycles in the economy, while avoiding bureaucratic regulation or distortions of market forces. Monetarism has become the dominant framework of theory in both academic economics and public policy. It is closely associated with neo-conservatism, a version of liberalism that stresses free markets and individualism rather than the ‘welfare state’ vision that had become dominant in most western societies. There is controversy over the role of monetarist policies in the current deficit problems of most of the worlds' largest economies. See: FISCAL CRISIS / KEYNESIAN ECONOMICS / .

Last updated 2002--0-9-

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© Robert Drislane, Ph.D. and Gary Parkinson, Ph.D.
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