If ‘money matters’, what about the monetary base?

Crucial to the debates on monetarism is the money aggregate relevant to its key propositions, in particular those that relate to the determination of nominal national income and inflation. In his influential work on ‘market monetarism’, Scott Sumner has accorded a privileged position to the monetary base in the key monetarist propositions. This article argues that, on the contrary, in a modern economy the role of cash is so small, as well as so clandestine, that the monetary base does not play any direct role in the determination of national income and inflation.