Divorcing Money From Monetary Policy

Monetary policy has traditionally been viewed as the process by which a central bank uses its influence over the supply of money to promote its economic objectives. For example, Milton Friedman (1959, p. 24) defined the tools of monetary policy to be those "Powers that enable the [Federal Reserve] System to determine the total amount of money in existence or to alter that amount." In fact, the very term monetary policy suggests a central bank's policy toward the supply of money or the level of some monetary aggregate.