Monetarism and fiscalism

Abstract

Monetarism and Fiscalism have emerged as two alternative stabilisation strategies that are in contention at this time. Monetarism seeks to control the monetary aggregates in order to stabilise the growth in money income, while Fiscalism centres its policies on controlling the degree of stimulus or restraint in the budget. The present work examines the substantive differences between Monetarists and Fiscalists concerning the theory or money, the theory of interest rates and prices, the theory of fiscal policy, and their respective views on rules, guidelines, discretion etc. This analysis of their aggregative theories is then used to identify some essential analytical and policy differences between Monetarists and Fiscalists, form any other differences that reflect transitory factors and may therefore diminish in time.