Glossary: monetarists
DEFINITION:
Advocates of monetarism, an economic policy based on the control of a country’s money supply. Monetarists assume that the quantity of money in an economy determines its economic activity, particularly its rate of inflation. A rapid increase in the money supply creates rising prices, resulting in inflation. To curb inflationary pressures, governments need to reduce the supply of money and raise interest rates. Monetarists believe that conservative monetary policies, by controlling inflation, will increase export earnings and encourage foreign and domestic investments. Monetarists have generally sought support for their policies from the International Monetary Fund (q.v.), the World Bank Group (q.v.), and private enterprise, especially multinational corporations. The University of Chicago economist Milton Friedman is considered to be a leading monetarist.