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Hello Michael,
There is little more that I can say except in response to your last
comments about the ECB. It seems to me that the ECB follows pretty closely
the newer inflation targeting work of Bernanke, Mishkin, et al, rather than
monetarism, per se. I would certainly agree that this newer literature has
a part of its origin in "old Chicago monetarism", at least to the extent
that it is explicitly based on the assumption that in the long run all
monetary policy can do is affect the price level. But it is also different
than monetarism in many important ways. I bring this point up not to defend
the ECB, but rather to share my reflection that to understand the ECB's
current policy position one might well start by thinking about Friedman's
influence, but that we would also want to work through carefully the nature
of the emergence of an alternative school of monetary economics (the
inflation targeters), what they advocate, how they developed their current
authority, how their ideas changed and evolved as they were tried first in
New Zealand, and then around the world, and how the economic conditions of
the last 2 decades serve as a backdrop to their emergence. While Friedman
is still a giant in the public mind, there are many other factors at work,
I suspect, in the ECB's current policy stance than just Friedman's
monetarism.
Perhaps what we need now is an international study group on the rise and
fall of monetarism? There are many important questions and issues that
simply have not been asked, much less answered.
Best,
Brad
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