058. Economic theories: Monetarism

Monetarism, led by Milton Friedman, is an economic theory that emphasizes the importance of controlling the money supply to manage economic activity and inflation. It argues that monetary policy is more effective than fiscal policy for ensuring economic stability. Monetarists advocate for steady, rules-based increases in money supply rather than discretionary interventions. While monetarism influenced major policies in the 1970s and 1980s, its predictive power has been challenged by financial innovations and economic crises. Today, central banks use monetarist insights for inflation targeting but also incorporate elements from other economic theories.