Friedman's Monetary Theory

Friedman's many contributions to monetary theory did much to renew interest in monetary theory and policy. Heretofore, there has been no statement of the underlying theory that guides his work and generates policy implications. Two recent papers attempt to fill the gap. We have four main criticisms of Friedman's theory. We regard as most important that the theories do not generate principal monetarist conclusions about the role of money and the variability of monetary policy. Friedman's static frameworks leave the relative potency of fiscal and monetary policies dependent on the slopes of the IS and LM curve. This is unsatisfactory.