The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Monetary Policy, History of

  • Michael D. Bordo
Reference work entry


Monetary policy has evolved over the centuries, with the development of the money economy. To implement monetary policy the monetary authority uses its policy instruments (short-term interest rates or the monetary base) to achieve its goals of low inflation and real output close to potential. This article surveys the origins of monetary policy from the classical gold standard to the evolution of central banks and their quest for goal independence, documenting the evolution of the goals, instruments and intermediate targets of monetary policy, and surveying the development of theories of monetary policy, including the debate over rules versus discretion.


Assignats Bank of England Bank rate Banking school Bretton Woods system Bullionist controversy Central bank independence Commitment Convertibility Credit rationing Currency school Debasement Discount rate Federal reserve system Fiat money Fiduciary money Fiscal policy Gold standard Great depression Inflation Inflation targeting Interest rate Law, J Lender of last resort Monetarism Monetary base central bank Monetary policy targets Monetary policy, history of Money Money supply Natural rate of interest Open market operations Phillips curve Price stability Quantity theory of money Real bills doctrine Real rate of return on capital Rediscounting Reserve requirements Rules versus discretion Seigniorage Sterilization Taylor rule Time consistency Velocity of circulation 

JEL Classification

D4 D10 
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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Michael D. Bordo
    • 1
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