Analysis of the functional domain of doctrinal approaches in monetary theory and policy

Abstract

The genesis and development of economic and financial thought are characterized by the past and yet still ongoing struggle and confrontation between monetarists and Keynesians, their mutual polarization, and the long-standing debate "for and against" new theories, which has demonstrated that theoretical and analytical disagreements essentially do not exist, especially not between the leading monetarists and keynesians. The opposing theses "money is not important" and "only the money is important" have been transmitted, after a decade of theoretical and empirical testing, into the official common thesis that "money is important". In this paper, using the desk research method, we start from an aspiration to present the genesis of these different approaches, however avoiding to reduce it to the synthesis of approaches, but rather striving to point to valuable contribution of such polemics in order to reconsider global tendencies in implementing monetary and general macroeconomic policies. In generic terms, the ongoing global financial crisis has justified the validity of such reconsiderations, since monetary and fiscal policies are the most suitable instruments for macroeconomic policy of growth management.

The Mediating Effect of Money Growth And General Public Consumption In The Fiscal Deficit-Inflation-Growth Nexus of The West African Monetary Zone: A Multilevel Structural Model Approach

“…In effect when fiscal and monetary authorities of the economy have mutually exclusive objectives the realization of the desired price level will not be achieved. This is at variance to previous ideology espoused by the monetarist doctrine, which has stated that price stability could be attained under a strong and independent central bank driving technically robust and assertive monetary policy regardless of prevailing fiscal interests (Živković and Ristić 2019) . The Monetarists have argued that inflation is fundamentally a monetary phenomenon and they have posited that budget deficit could be inflationary to the extent that it would be monetized (Hamburger and Zwick 1981).…”

Meta Analyses and Controversy About Financialization, Growth and Stability: A look from post-transition countries of last decade

“…This, however, does not mean that monetarists, when forecasting fluctuations in income, cannot take into account individual phenomena; it also does not mean that they find that capital rationalization is necessary due to an unfinished capital market and that they do not frown upon state intervention due to nonbelief in the stability of the economic sector. (Živković, A, Ristić, K., 2020) Monetarists are opponents of state intervention and supporters of the free market process. The Keynesians, on the other hand, are supporters of the state intervention and opponents of adhoc market mechanism.…”

“…The Keynesians, on the other hand, are supporters of the state intervention and opponents of adhoc market mechanism. As opponents of state intervention, monetarists do not think that a countercyclical fiscal policy should be pursued; because, as Mayer (Živković, A, Ristić, K., 2020) claims, a countercyclical fiscal policy can cause a higher increase in public sector spending in the recession period than a reduction in expenditures in the period of expansion and, therefore, public expenditures are continuously increasing. However, Tobin pointing to a negative attitude (Živković, A., Lakić, S., Ristić, K., 2019) argues that inflation cannot be used as a reason for budget cuts, if fiscal policy has little or no effect on income.…”

“…As a result, monetarists consider that discretionary fiscal changes are not needed as an instrument of economic stabilization during the long-term application of stable monetary growth. (Živković, A., Ristić, K., 2020)…”