Monetary control in open economies: National versus global monetarism

For about a decade the central banks of the leading Western industrial nations have set annual money supply targets. 1 Despite the common monetarist tone of their strategies, each central bank uses its own definition of the money supply relating solely to its national territory (national monetarism), thereby laying itself open to criticism from those who, like Professor Ronald McKinnon, hold that nationally oriented money supply control has had its day and instead advocate management of the world money supply (global monetarism). 2 The following article tests the arguments of the proponents of an international quantity theory and examines whether domestically oriented money supply management is really out of tune with the times.