10 years of Market Monetarist thinking

On this day ten years ago I published a Working Paper on Marcus Nunes’ blog “The Faint of Heart” with the title “Market Monetarism – The Second Monetarist Counter-revolution”.

This is the Working Paper in which I coined the term “Market Monetarism”. Little did I know that over the following decade monetary scholars as well as central bankers would refer to market monetarism as a school of thought and little did I know that market monetarism would have such an impact on monetary policy discussions globally as it indeed has had.

I strongly believe that market monetarist thinking had a strong and positive influence on the conduct on monetary policy in particularly the US and the world is a better place for that reason.

I coined the the name of the school and I think I played a important role through my blog in developing the ideas of market monetarism, but others did a lot more – economists such as Scott Sumner, David Beckworth, Nick Rowe and Marcus Nunes.

This is the abstract of the paper I wrote 10 years ago:

Market Monetarism is the first economic school to be born out of the blogosphere. Market Monetarism shares many of the views of traditional monetarism but unlike traditional monetarism Market Monetarism is sceptical about the usefulness of monetary aggregates as policy instruments and as an indicator for the monetary policy stance. Instead, Market Monetarists recommend using market pricing to evaluate the stance of monetary policy and as a policy instrument.

Contrary to traditional monetarists  who recommend a rule for money supply growth Market Monetarists recommend targeting the Nominal GDP (NGDP)level. The view of the leading Market Monetarists is that the Great Recession was not caused by a banking crisis but rather by excessively tight monetary policy. This is the so-called Monetary Disorder view of the Great Recession.

Read (or re-read) the paper here.