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Economic Management in the Mixed Economy

In: Money and Employment

Author

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  • R. J. Ball

    (London Business School)

Abstract

The argument just presented constitutes a case for ‘practical monetarism’. This rests on three main propositions. Firstly, in the medium term, there is a stable although not precise relationship between the growth of the supply of money and the growth of nominal expenditure although this relationship may vary from year to year because of the lags in behaviour in the economic system. Secondly, in the medium term, monetary changes mainly influence nominal rather than real magnitudes, and the period of adjustment is relevant to current policy making. Thirdly, while in the medium term the behaviour of the money supply is relevant to the behavior of the inflation rate, in the short run prices may change for other reasons. The practical monetarist does not seek to replace one spurious target, the level of employment, by another, namely the price level. Fine-tuning the price level is not the name of the game. The general thesis is that a stable and relatively low rate of growth of the money supply is a necessary condition for the control of inflation, and for ensuring steady growth in real output and a stable level of employment.

Suggested Citation

  • R. J. Ball, 1982. "Economic Management in the Mixed Economy," Palgrave Macmillan Books, in: Money and Employment, chapter 8, pages 209-234, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-16695-4_8
    DOI: 10.1007/978-1-349-16695-4_8
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