Monetary policies that attribute the fluctuations in the extension or the shrinkage of the money supply (Milton Friedman)
The investment theories that are based on the interaction between the increase of the production and the investment.(Paul Samuelson)
The theories regarding the labour market which attribute the economic fluctuations in the price stiffness(wages) (Robert Lucas)
Shifts in the aggregate demand curve
Shifts in the aggregate supply curve
Monetary policy and economic fluctuations
Taking into account the fact that investment is an important ingredient of GDP and the fact that investment is determined among other variables also by the monetary variables like the interest rate, we deduce that the monetary policy is a significant element of the economic fluctuations. Generally speaking, monetary policy is any policy related to the money supply.
Monetary policy can cause recessions and booms. The interest rate is an important factor for the growth of the money stock. A company can cancel or postpone a financial or extension (investment the build of a new factory) because the cost of borrowing is high. Similarly, a consumer can cancel or postpone a new loan or the buy of the new house because the high interest rate can make this movement unaffordable.
So the institution or the government that decide the interest rate for a country of for a group of countries (like Europe) can generate booms or recessions.
There are two schools of thinking regarding the relation between the monetary policy and the economy. The Keynesian economists consider the private sector inefficient and unstable and support that the stabilization of the output can be done only by the intervention of the public sector. According to Keynes, the government needs to stress the fiscal policy actions and the central bank the monetary policy actions. The Keynesian economists support the government intervention especially during recession periods and the focus on boosting the government expenditures and decreasing the taxes in order to bolster up the aggregate demand. Nowadays, the current financial crisis is considered to be the worst since the Great Depression of 1930. All markets are suffering, many institutions ruins, many banks collapsed and the policy makers accept Keynes analysis after moving away the neoclassical models and governments and banks move to an unprecedented monetary and more fiscal expansion. The financial crises of 2008 has been characterised as the period of the resurgence to Keynesian economics. In growth period they suggest measures to decrease the aggregate demand such as increase of the interest rate. For Keynesian economists there is an indirect link between the GDP and the monetary policies.(责任编辑：BUG)