A Small Corner of Intertemporal Public Finance - New Developments in Monetary Economics: Two Ghosts, Two Eccentricities, a Fallacy, a Mirage and a Mythos
AbstractMonetary theory and policy are part of intertemporal public finance. This Paper reviews some interesting recent developments. The two ghosts are the venerable liquidity trap and the Pigou effect or real balance effect. The eccentricities are negative nominal interest rates and the helicopter drop of base money – two unconventional policies for stimulating consumer demand even when nominal interest rates, short and long, present and future, are at their zero lower bounds. The fallacy is the so-called Fiscal Theory of the Price Level, a logically inconsistent theory of the link between the government budget and the general price level. The mirage is the prediction that financial deregulation and technical change in the payments and settlements technology (e-money etc.) will cause monetary policy to lose its capacity to influence even nominal economic variables. Mythos refers to the independent central bank.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4407.
Date of creation: Jun 2004
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- E00 - Macroeconomics and Monetary Economics - - General - - - General
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
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- Buiter, Willem H. & Sibert, Anne C., 2007.
Open Access publications from London School of Economics and Political Science
http://eprints.lse.ac.uk/, London School of Economics and Political Science.
- Willem H. Buiter & Anne C. Sibert, 2004. "Deflationary Bubbles," NBER Working Papers 10642, National Bureau of Economic Research, Inc.
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- Buiter, Willem H & Sibert, Anne, 2006. "Deflationary Bubbles," CEPR Discussion Papers 5637, C.E.P.R. Discussion Papers.
- Willem Buiter & Anne Sibert, 2004. "Deflationary Bubbles," Birkbeck Working Papers in Economics and Finance 0409, Birkbeck, Department of Economics, Mathematics & Statistics.
- Buiter, Willem H, 2004.
"The Elusive Welfare Economics of Price Stability As A Monetary Policy Objective: Should New Keynesian Central Bankers Persue Price Stability,"
CEPR Discussion Papers
4730, C.E.P.R. Discussion Papers.
- Willem H. Buiter, 2004. "The Elusive Welfare Economics of Price Stability as a Monetary Policy Objective: Should New Keynesian Central Bankers Pursue Price Stability?," NBER Working Papers 10848, National Bureau of Economic Research, Inc.
- Harashima, Taiji, 2006. "The Sustainability of Budget Deficits in an Inflationary Economy," MPRA Paper 905, University Library of Munich, Germany.
- Harashima, Taiji, 2007. "The Optimal Quantity of Money Consistent with Positive Nominal Interest Rates," MPRA Paper 1839, University Library of Munich, Germany, revised 19 Feb 2007.
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