Optimal Monetary Policy in Economies with ‘StickyInformation’ Wages,” Working Paper, Federal Reserve Bank of

Friedman initiated an intense “rules versus discretion ” debate by calling for the Federal Reserve to maintain constant growth of the money supply (Friedman 1959). The focus of this early debate was on whether an active monetary policy or a passive monetary policy is more successful at stabilizing output. Over the years, the debate has continued, but its terms have shifted. First, large swings in the velocities of the monetary aggregates have led many econo-mists to turn away from Friedman’s constant-money-growth prescription, toward policy rules that are more directly concerned with output and prices