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Friedman was a strong advocate for floating exchange rates throughout the entire Bretton-Woods period (1944–1971). He argued that a flexible exchange rate would make external adjustment possible and allow countries to avoid balance of payments crises. He saw fixed exchange rates as an undesirable form of government intervention.
The debate of choosing between fixed and floating exchange rate methods is formalized by the Mundell–Fleming model, which argues that an economy (or the government) cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. It must choose any two for control and leave the other to market ...
Some of Friedman's suggestions are being tested and implemented in many places, such as the flat income tax in Estonia (since 1994) and Slovakia (since 2004), a floating exchange rate which has almost fully replaced the Bretton Woods system, and national school voucher systems in Chile (since 1981) and Sweden (since 1992), [5] to cite a few ...
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In their 2008 book Full Employment Abandoned, Mitchell and Joan Muysken use the term to explain monetary systems in which national governments have a monopoly on issuing fiat currency and where a floating exchange rate frees monetary policy from the need to protect foreign exchange reserves. [32]
A Monetary History of the United States, 1867–1960 is a book written in 1963 by future Nobel Prize-winning economist Milton Friedman and Anna Schwartz.It uses historical time series and economic analysis to argue the then-novel proposition that changes in the money supply profoundly influenced the United States economy, especially the behavior of economic fluctuations.
The Friedman rule is a monetary policy rule proposed by Milton Friedman. [1] Friedman advocated monetary policy that would result in the nominal interest rate being at or very near zero. His rationale was that the opportunity cost of holding money faced by private agents should equal the social cost of creating additional fiat money .
Milton Friedman, in a 2000s interview, maintained that "the debate was over" and that "everyone agrees fundamentally" with the notion of monetary-policy supremacy. [21] He stated that he still had "far more extreme views about the unimportance of fiscal policy for the aggregate economy than the [economist] profession does."