The Role of Financial Policy

19 Pages Posted: 5 Apr 2018

See all articles by Roger E. A. Farmer

Roger E. A. Farmer

University of California, Los Angeles (UCLA) - Department of Economics; University of Warwick; National Institute of Economic and Social Research (NIESR); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2018

Abstract

I review the contribution and influence of Milton Friedman's 1968 presidential address to the American Economic Association. I argue that Friedman's influence on the practice of central banking was profound and that his arguments in favour of monetary rules was responsible for thirty years of low and stable inflation in the period from 1979 through 2009. I present a critique of Friedman's position that market-economies are self-stabilizing and I describe an alternative reconciliation of Keynesian economics with Walrasian general equilibrium theory from that which is widely accepted today by most neo-classical economists. My interpretation implies that government should intervene actively in financial markets to stabilize economic activity.

Keywords: Keynesian economics, Monetarism, Natural rate of unemployment

JEL Classification: E3, E4

Suggested Citation

Farmer, Roger E.A., The Role of Financial Policy (March 2018). CEPR Discussion Paper No. DP12825, Available at SSRN: https://ssrn.com/abstract=3155161

Roger E.A. Farmer (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Bunche Hall 8283
P.O. Box 951477
Los Angeles, CA 90095-1477
United States
310-825-6547 (Phone)
310-825-9528 (Fax)

University of Warwick ( email )

Coventry CV4 7AL
United Kingdom

HOME PAGE: http://Rogerfarmer.com

National Institute of Economic and Social Research (NIESR) ( email )

2 Dean Trench Street
Smith Square
London, SW1P 3HE
United Kingdom

HOME PAGE: http://NIESR.ac.uk

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
202
PlumX Metrics