Friedman's k-percent rule is the monetarist proposal that the money supply should be increased by the central bank by a constant percentage rate every year, irrespective of business cycles. Milton Friedman coauthored a book with Anna Schwartz to summarise a historical analysis of monetary policy, called "Monetary History of the United States 1867-1960". The book attributed inflation to excess money supply generated by a central bank. It attributed deflationary spirals to the reverse effect of a failure of a central bank to support the money supply during a liquidity crunch. Friedman proposed a fixed monetary rule, called Friedman's k-percent rule, where the money supply would be calculated by known macroeconomic and financial factors, targeting a specific level or range of inflation.
Under this rule, there would be no leeway for the central reserve bank as money supply increases could be determined "by a computer" and business could anticipate all monetary policy decisions.
Read more about Friedman's K-percent Rule: Definition, Monetary Policy, Rules Vs. Discretion in Monetary Policies, Modified K-percent Rule, Criticisms
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