Neutrality of Money

Exploring the Neutrality of Money: Theory, History, and Critique

The concept of the neutrality of money, often referred to as neutral money, is a fundamental economic theory that posits changes in the money supply primarily affect nominal variables rather than real variables. This article delves into the intricacies of the neutrality of money, examining its theoretical underpinnings, historical development, and critiques from various economic perspectives. From its origins in the Cambridge tradition to modern interpretations by economists such as Friedrich A. Hayek, the neutrality of money remains a subject of debate and scrutiny in economic theory.