Hayek's Monetary Theory and Policy: A Critical Reconstruction

White, Lawrence H.

doi:10.2307/2601142

Cited by 64 publications

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“…Without going into a discussion about the appropriate monetary policy, it is important to clarify that the concept of neutral money was created as a theoretical concept applied to the abstract conception of a general equilibrium economy with money, not as a policy objective (see Hayek [1933Hayek [ ] 1984. For a discussion of Hayek's changing views on monetary policy, see White 1999. predict future wants and plan ahead. In the state of equilibrium nothing ever materializes that has not been foreseen by market participants.…”

Section: Intertemporal Equilibriummentioning

confidence: 99%

Hayek's Business Cycle Theory during the 1930s: A Critical Account of Its Development

Repapis¹

2011

History of Political Economy

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Section: Intertemporal Equilibriummentioning

confidence: 99%

Hayek's Business Cycle Theory during the 1930s: A Critical Account of Its Development

Repapis¹

2011

History of Political Economy

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“…White (1999) indicated inconsistency in the Hayek (1976) later works, in which Hayek permitted stabilization of an index of prices of commodities. Komrska and Hudík (2016) explained that this alleged inconsistency is illusive.…”

Section: Relative Prices In a Growing Economymentioning

confidence: 99%

Price Level Stabilization: Hayek contra Mainstream Economics

Potuzak¹

2018

Prague Economic Papers

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The doctrine of beneficial effects of price level stabilization is an integral part of modern mainstream economics. In the 1920s and 1930s, Friedrich August von Hayek questioned this monetary policy regime, and stressed injection effects of the newly created money aimed at price level stabilization in the economy with expanding natural output. This paper compares the Hayekian theory with mainstream economics. A simple graphical apparatus is used to clarify major differences between the two theories. Standard textbook models are applied to show why the Hayekian approach favours secular deflation over price level stabilization which may lead to the boom-bust cycle. The next section presents New Keynesian arguments in favour of stable prices or even low inflation, and it shows why the Hayek recommendations may result in quasi-recession. The "Wicksellian" equation, which relates inflation gap to the real interest rate gap, is derived to reconcile the Hayek approach with the mainstream perspective. Finally, it is demonstrated that New Keynesian price rigidities might be of much lower importance when the decline in prices is caused by technological progress. A gradually falling price level is then identified as a natural response of the price system in the expanding economy.

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“…White (, p. 117) notes that Hayek's defence of a system of competitive issues on the grounds that it would ‘more effectively achieve price‐level stability’ represents a clear departure from the view espoused by Hayek in earlier works, where price‐level stability was rejected in favour of stabilising M (e.g. Hayek , ) or MV (e.g.…”

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confidence: 99%

Friedman Versus Hayek on Private Outside Monies: New Evidence for the Debate

Luther

2013

Economic Affairs

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Friedrich Hayek is often credited with the resurgence of interest in alternative monetary systems. His own proposal, however, received sharp criticism from Milton Friedman, Stanley Fischer, and others at the outset, and never gained much support among academic economists or the wider population. According to Friedman, Hayek erred in believing that the mere admission of competing private currencies will spontaneously generate a more stable monetary system. In Friedman's view, network effects and switching costs discourage alternative systems in general from emerging and prevent Hayek's system in particular from functioning as desired. I offer new evidence provided by events in Somalia since the 1990s as support for Friedman's initial doubts.

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Hayek's Monetary Theory and Policy: A Critical Reconstruction

Cited by 64 publications

References 0 publications

Hayek's Business Cycle Theory during the 1930s: A Critical Account of Its Development

Hayek's Business Cycle Theory during the 1930s: A Critical Account of Its Development

Price Level Stabilization: Hayek contra Mainstream Economics

Friedman Versus Hayek on Private Outside Monies: New Evidence for the Debate

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