Monetarist Views

Abstract

For the U.K., unlike the U.S. economy, there is no complete model that is regularly used in forecasting which could be said to be Monetarist, at least in the sense outlined below.¹ Also, it is difficult to accept that policy prescriptions arrived at by analysing large-scale U.S. Monetarist models are equally applicable to the United Kingdom. Although the U.K. economy might in part be characterised by the same type of behavioural relations as the U.S. economy, it is nevertheless unlikely that the size of the coefficients in such behavioural equations are the same. In addition the U.S. economy closely approximates a closed economy, and U.S. models are therefore likely to omit aspects crucial to an understanding of the behaviour of a small open economy like the United Kingdom. We have attempted to solve this particular dilemma by presenting a U.K. Monetarist model which, unlike the Keynesian and New Cambridge models, is the preserve of no particular forecasting organisation but is instead based on an amalgam of the research work of a number of monetary economists. Naturally, given this eclectic approach, it is possible, indeed probable, that some people who label themselves as ‘Monetarists’will disagree with some elements of the Monetarist model presented here; however, it is hoped that such people are in broad agreement with what follows.