Ludwig von Mises Institute

Monetary policy

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Monetary policy refers to the manipulation of the supply of money by an institution which has the monopoly control of money production in a nation - usually a central bank - in an attempt to achieve certain objectives. Commonly these stated objectives are to maintain economic growth, limit unemployment, or both.[1] Monetary policy includes actions such as qualitative easing and quantitative easing. Those who advocate the use of monetary policy, such as monetarists and Keynsians, presuppose that changes in the money supply can result in positive changes in economic growth or employment.[1] However, other economic schools of thought such as Austrian economics, suggest that manipulation in the money supply will not achieve such desired effects and instead often will result in redistributions of wealth and other harmful economic distortions.[2] Furthermore, the Austrian business cycle theory attempts to show how it is in fact the actions of central banks, through inflationary monetary policies, which lead to the booms and busts of business cycles.[3]


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