Editors Note to"The Role of Money and Monetary Policy The following is a guest article prepared by Dr. Karl Brunner. Since July 1966, Dr. runner has be en the Everett D. Reese Professor of Economics at The Ohio State Univer sity. For the previous fifteen years he was Professor of Economics at the University of California at Los Angeles In this article Dr. Brunner examines the current status of the debate regarding the role of money and monetary policy in economic stabil ization actions. It is presented in this Review with the anticipation that his examination of the issues involoed in this debate will bring forth further discussion by proponents of the various views. Such discussions are essential for development of the framework required for rational stabilization policy Dr. Brunner and several other well-known economists have been leading proponents of the monetary view of economic stabilization. On the basis of a great amount of theo retical and empirical research, they contend that the Federal reserve can control the money stock and that the money stock is a good indicator of the thrust of Federal Reserve actions on output, employment, and prices. These economists have been critical of the role played by the Federal Reserve System in monetary management because they have found little euidence that the System has recognized the importance of money in carrying out its responsibility for economic stabilization A countercritique to the criticisms of these monetary economists has been presented in seceral publications of the Federal Reserve System. This countercritique derives its eco- nomic foundations from a so-called"New View"of monetary economics. This"New View stresses the role of assets, both real and financial, and the relative price mechanism in mone- tary analysis. The countercritique contends that the Federal Reserve has little control over the money stock and that the money stock plays only a minor role in the transmission mechanism linking Federal Reserve actions to the real sectors of the economy Dr. Brunner, in this article, analyzes and evaluates tarious issues raised by the counter critique. He points out that the main economists who stress the role of money and monetary policy also utilize the asset and relative price approach to monetary analyis; hence, in this regard there is little difference between them and the"New View. The main point of conten- tion between the two groups, according to Dr. Brunner, lies in the extent of the development of testable hypotheses bearing on the issues raised by each group. He maintains that the onetary point of view has developed such hypotheses and has subjected them to rigor ous empirical examination. On the other hand, the " New view and the countercritique according to Dr. Brunner, have kept their analyses of the monetary mechanism in the realm of abstract economics. He characterizes their analyses as"an empty form with little empirical Recent discussions of various points of view on these issues appear in"Standards For Guiding Monetary Actions, hearings before the Joint Economic Committee, May 1968 Positions of academic economists, business economists, and members of the Board of Gou- ernors of the Federal Reserve System are contained in these hearings. The"Report of the Committee, June 1968, recommends to the Federal Reserve System that the yearly growth of the money stock be held within a range of 2 to 6 per cent Numerous works are cited in this article, and the interested reader should refer to them for laboration of the many summary arguments adbanced by the author. Several statistical tests are reported in tables; the author should be contacted directly for further information on these tests and in regard to the data used Page 8y,.:_.:_~... ..~Ma,aaaeaa.aaAgi.,ava-., . - -. “n.IM~,4 ~th~x g~a..ahi¼nAMW k.a-.._.&fr.,A.e..~,. Editor’s Note to “The Role of Money and Monetary Policy” The following is a guest article prepared by Dr. Karl Brunner. Since July 1966, Dr. Brunner has been the Everett D. Reese Professor of Economics at The Ohio State Univer￾sity. For the previous fifteen years he was Professor of Economics at the University of California at Los Angeles. in this article Dr. Brunner examines the current status of the debate regarding the role of money and monetary policy in economic stabilization actions. It is presented in this Review with the anticipation that his examination of the issues involved in this debate will bring forth further discussion by proponents of the various views. Such discussions are essential for development of the framework required for rational stabilization policy. Dr. Brunner and several other well-known economists have been leading proponents of the monetary view of economic stabilization. On the basis of a great amount of theo￾retical and empirical research, they contend that the Federal Reserve can control the money stock and that the money stock is a good indicator of the thrust of Federal Reserve actions on output, employment, and prices. These economists have been critical of the role played by the Federal Reserve System in monetary management because they have found little evidence that the System has recognized the importance of money in carrying out its responsibility for economic stabilization. A countercritique to the criticisms of these monetary economists has been presented in several publications of the Federal Reserve System. This countercritique derives its eco￾nomic foundations from a so-called “New View” of monetary economics. This “New View” stresses the role of assets, both real and financial, and the relative price mechanism in mone￾tary analysis. The countercritique contends that the Federal Reserve has little control over the money stock and that the money stock plays only a minor role in the transmission mechanism linking Federal Reserve actions to the real sectors of the economy. Dr. Brunner, in this article, analyzes and evaluates various issues raised by the counter￾critique. He points out that the main economists who stress the role of money and monetary policy also utilize the asset and relative price approach to monetary analyis; hence, in this regard there is little difference between them and the “New View.” The main point of conten￾tion between the two groups, according to Dr. Brunner, lies in the extent of the development of testable hypotheses bearing on the issues raised by each group. He maintains that the monetary point of view has developed such hypotheses and has subjected them to rigor￾ous empirical examination. On the other hand, the “New View” and the countercritique, according to Dr. Brunner, have kept their analyses of the monetary mechanism in the realm of abstract economics. He characterizes their analyses as “an empty form with little empirical content.” Recent discussions of various points of view on these issues appear in “Standards For Guiding Monetary Actions,” hearings before the Joint Economic Committee, May 1968. Positions of academic economists, business economists, and members of the Board of Gov￾ernors of the Federal Reserve System are contained in these hearings. The “Report of the Committee,” June 1968, recommends to the Federal Reserve System that the yearly growth of the money stock be held within a range of 2 to 6 per cent. Numerous works are cited in this article, and the interested reader should refer to them for elaboration of the many summary arguments advanced by the author. Several statistical tests are reported in tables; the author should be contacted directly for further information on these tests and in regard to the data used. Page 8