Market monetarism is a school of macroeconomics that advocates that central banks use a nominal income target instead of inflation, unemployment, or other measures of economic activity, including in times of demand shocks such as the bursting of the 2000s United States housing bubble and in the 2007–2008 financial crisis.[1] In contrast to traditional monetarists, market monetarists do not believe that money supply or commodity prices such as gold are the optimal guide to intervention. Market monetarists also reject the New Keynesian focus on interest rates as the primary instrument of monetary policy.[1] Market monetarists prefer a nominal income target due to their twin beliefs that rational expectations are crucial to policy, and that markets react instantly to changes in their expectations about future policy, without the "long and variable lags" postulated by Milton Friedman.[2][3]
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