Abstract
The optimum quantity of money is a normative monetary policy conclusion drawn from the long-run properties of a theoretical model. Most famously associated with Milton Friedman, the optimum calls for a zero nominal rate of interest and thus a steady state of price deflation at the long-run real rate of interest. Although this policy prescription has played a minor role in monetary policy implementation, it has had an enormous influence in monetary theory.
This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume
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Acknowledgement
The author would like to thank Charles Carlstrom and John Hoag for their helpful comments.
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Fuerst, T.S. (2008). Optimum Quantity of Money. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_1740-2
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DOI: https://doi.org/10.1057/978-1-349-95121-5_1740-2
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Publisher Name: Palgrave Macmillan, London
Online ISBN: 978-1-349-95121-5
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Chapter history
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Latest
Optimum Quantity of Money- Published:
- 21 March 2017
DOI: https://doi.org/10.1057/978-1-349-95121-5_1740-2
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Original
Optimum Quantity of Money- Published:
- 24 November 2016
DOI: https://doi.org/10.1057/978-1-349-95121-5_1740-1