Passive Money, Active Money, and Monetary Policy
AbstractThis article by the Bank's visiting economist examines the role of money in the transmission of monetary policy. Professor Laidler argues against the view of money as a passive variable that reacts to changes in prices, output, and interest rates but has no direct causative effecton them. He maintains that the empirical evidence supports the view of money playing an active role in the transmission mechanism. While he agrees that individual monetary aggregates can be difficult to read because of instabilities in the demand-for-money function, he argues that monetary aggregates, particularly those relating to transactions money, should have a more significant place in the hierarchy of policy variables that the Bank considers when formulating monetary policy.
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Bibliographic InfoArticle provided by Bank of Canada in its journal Bank of Canada Review.
Volume (Year): 1999 (1999)
Issue (Month): Summer ()
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- Stracca, Livio, 2007. "Should we take inside money seriously?," Working Paper Series 0841, European Central Bank.
- Jan Korda, 2010. "A Comparison of New Consensus as a Theoretical Framework of Inflation Targeting with Post-Keynesian Economics," Politická ekonomie, University of Economics, Prague, vol. 2010(1), pages 92-104.
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