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Ricardo versus Thornton on the appropriate monetary response to supply shocks

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  • Thomas M. Humphrey

Abstract

David Ricardo (1772-1823) recommended countering supply shocks with monetary contraction. Henry Thornton (1760-1815) advised a constant-money response. Their views hinged (1) on the neutrality or non-neutrality of money-stock changes on real output and employment and (2) on the costs of inflation. These same considerations influence Federal Reserve policy in response to oil shocks today.

Suggested Citation

  • Thomas M. Humphrey, 1990. "Ricardo versus Thornton on the appropriate monetary response to supply shocks," Economic Review, Federal Reserve Bank of Richmond, vol. 76(Nov), pages 18-24.
    • Handle: RePEc:fip:fedrer:y:1990:i:nov:p:18-24:n:v.76no.6
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    References listed on IDEAS

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    1. Matthew D. Shapiro, 1987. "Supply Shocks in Macroeconomics," NBER Working Papers 2146, National Bureau of Economic Research, Inc.
    2. O'Brien, D P, 1981. "Ricardian Economics and the Economics of David Ricardo," Oxford Economic Papers, Oxford University Press, vol. 33(3), pages 352-386, November.
    3. James C. W. Ahiakpor, 1985. "Ricardo on Money: The Operational Significance of the Non-Neutrality of Money in the Short Run," History of Political Economy, Duke University Press, vol. 17(1), pages 17-30, Spring.
    4. Fischer, Stanley, 1985. "Supply Shocks, Wage Stickiness, and Accommodation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(1), pages 1-15, February.
    5. Charles F. Peake, 1978. "Henry Thornton and the Development of Ricardo's Economic Thought," History of Political Economy, Duke University Press, vol. 10(2), pages 193-212, Summer.
    6. Robert M. Solow, 1980. "What to Do (Macroeconomically) When OPEC Comes," NBER Chapters, in: Rational Expectations and Economic Policy, pages 249-267, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Robert L. Hetzel, 2016. "The Rise and Fall of the Quantity Theory in Nineteenth Century Britain: Implications for Early Fed Thinking," Economic Quarterly, Federal Reserve Bank of Richmond, issue Q4, pages 281-320.
    2. J. Aschheim & G.S. Tavlas, 1994. "Nominal anchors for monetary policy: a doctrinal analysis," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 47(191), pages 469-494.
    3. Maria Cristina Marcuzzo & Annalisa Rosselli, 1994. "Ricardo's Theory of Money Matters," Revue Économique, Programme National Persée, vol. 45(5), pages 1251-1268.
    4. Keivan Deravi & Charles E. Hegji, 1992. "The Inflationary Impact Of Oil Price Shocks: A Vector Autoregressive Study," Review of Financial Economics, John Wiley & Sons, vol. 2(1), pages 1-16, September.

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    Economists; Monetary theory;

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