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The Rise and Fall of M2
chart From the 1960s to the 1980s, the "Monetarist" School of Economics, famously associated with Milton Friedman and the University of Chicago, would argue for the importance of monetary aggregates in economic activity.2 Mone tarism largely fell out of favor, however, because it was nearly impossible to find strong and consistent relations between monetary aggregates and variables of interest, such as prices and output. Technological and legal financial innovations contributed to instability in such relations. Monetarism's classic claim, however, is that growth in some monetary aggregate drives inflation, ... (full story)