Monetary policy is not about C, I, G or NX, but about NGDP

Monetary policy is not about C, I, G or NX, but about NGDP
I am sitting in Gatwick airport waiting to fly home to Copenhagen. Reflecting on a day of meetings with investors in London I am happy that people are willing to listen to my stories of the current crisis and particularly the mess we are in Europe. However, I also realize that I think the biggest hindrance for understanding the Market Monetarist message is that the starting point for most people - investors as well as policy makers - is Y=C+I+G+NX. I, however, think the world much more sense through the lens of the equation of exchange MV=PY - that we of course also can write as MV=NGDP. The money supply (M) times money-velocity (V) always equals nominal GDP (NGDP). The crisis was caused by a


WORLD LEADING ADVISORY SPECIALISING IN THIS TOPIC

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