Colin Rogers () (School of Economics, University of Adelaide)
Abstract
In Interest and Prices Woodford employs a frictionless model to derive nominal interest rate rules that can be applied by central banks to achieve price level stability. But frictionless models are Walrasian general equilibrium models that preclude any role for money. Furthermore frictionless model have no role for nominal values or the price level and therefore no role for a central bank. Consequently, conceptual anomalies arise in Woodford's attempt to analyse questions of monetary theory and policy that are precluded by construction in frictionless models. In some states of the model money is converted into a 鈥榝riction', contra economic theory.
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Publisher Info
Paper provided by University of Adelaide, School of Economics in its series Working Papers with number
2008-03.
Find related papers by JEL classification: B - Schools of Economic Thought and Methodology E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
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