Seven fallacies concerning Milton Friedman’s ”The Role of Monetary Policy”

Mostly Economics

Edward Nelson says there are 7 common fallacies around Friedman’s paper – The Role of Monetary Policy – which celebrated 50 years recently.

This paper analyzes Milton Friedman’s (1968) article “The Role of Monetary Policy,” via a discussion of seven fallacies concerning the article. These fallacies are:

(1) “The Role of Monetary Policy” was Friedman’s first public statement of the natural rate hypothesis.
(2) The Friedman-Phelps Phillips curve was already presented in Samuelson and Solow’s (1960) analysis.
(3) Friedman’s specification of the Phillips curve was based on perfect competition and no nominal rigidities.
(4) Friedman’s (1968) account of monetary policy in the Great Depression contradicted the Monetary History’s version.
(5) Friedman (1968) stated that a monetary expansion will keep the unemployment rate and the real interest rate below their natural rates for two decades.
(6) The zero lower bound on nominal interest rates invalidates the natural rate hypothesis.
(7) Friedman’s (1968) treatment of an…

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About Jim Rose

Utopia - you are standing in it promotes a classical liberal view of the world and champion the mass flourishing of humanity through capitalism and the rule of law. The origin of the blog is explained in the first blog post at https://utopiayouarestandinginit.wordpress.com/2014/03/12/why-call-my-blog-utopia-you-are-standing-in-it/

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