Editing Monetary policy (section)

=== Money supply targets ===

[[Monetarist]] economists long contended that the money-supply growth could affect the macroeconomy. These included [[Milton Friedman]] who early in his career advocated that [[government budget deficit]]s during recessions be financed in equal amount by [[money creation]] to help to stimulate [[aggregate demand]] for production.<ref>{{cite journal |last=Friedman |first=Milton |year=1948 |title=A Monetary and Fiscal Framework for Economic Stability |journal=[[American Economic Review]] |volume=38 |issue=3 |jstor=1810624 |pages=245–264 }}</ref> Later he advocated simply increasing the monetary supply at a low, constant rate, as the best way of maintaining low inflation and stable production growth.<ref>{{Cite book | first = Milton | last = Friedman | author-link = Milton Friedman | title = A Program for Monetary Stability | publisher = Fordham University Press | year = 1960 }}</ref> During the 1970s inflation rose in many countries caused by the [[1970s energy crisis]], and several central banks turned to a money supply target in an attempt to reduce inflation. However, when U.S. [[Federal Reserve]] Chairman [[Paul Volcker]] tried this policy, starting in October 1979, it was found to be impractical, because of the unstable relationship between monetary aggregates and other macroeconomic variables, and similar results prevailed in other countries.<ref name="Historical"/><ref>{{cite web | first = Ben | last = Bernanke | author-link = Ben Bernanke | title = Monetary Aggregates and Monetary Policy at the Federal Reserve: A Historical Perspective | publisher = Federal Reserve | year = 2006 | url = http://www.federalreserve.gov/newsevents/speech/bernanke20061110a.htm }}</ref> Even Milton Friedman later acknowledged that direct money supplying was less successful than he had hoped.<ref>{{cite report |doi=10.2139/ssrn.958933 |title=Milton Friedman and U.S. Monetary History: 1961–2006 |year=2007 |last1=Nelson |first1=Edward |s2cid=154734408 |url=https://files.stlouisfed.org/files/htdocs/publications/review/07/05/Nelson.pdf }}</ref>