Monetarism is a theory about the monetary policy of a central bank. The measures of a central bank are designed to achieve certain effects. The measures are based on assumptions according to which certain instruments result in certain effects. In the course of time different methodical approaches have been developed to turn these assumptions into theories.

The classic among these theories is the quality theory. J. M. Keynes developed the liquidity theory of interest in opposition to this. The liquidity theory represents a very sceptical view of monetary policy.

The counter movement to the liquidity theory was the rediscovery of monetary policy and with it the renaissance of the quantity theory, of which Milton Friedman can be called the principal protagonist. His position is called monetarism.

Monetarists largely agree that the central bank controls the nominal money supply, but not the supply in real terms. The money supply in real terms depends on the decisions of the economic subjects that are not affected by monetary policy.