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New economy, old central banks? Monetary transmission in a new economic environment

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  • Berk, Jan Marc

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

Abstract

Proponents of the so-called New Economy claim that it entails a structural change of the economy. Such a change, in turn, would require the central bank to rethink its monetary policy to the extent that traditional relationships between inflation and economic growth are no longer valid. But such a rethinking presupposes that prospective advances in information technology and other factors associated with the new economy do not threaten the capacity of central banks to stabilise the general level of prices. It is the aim of this paper to shed some light on the latter, by analysing the monetary transmission mechanism in a 'new economy' environment. We argue that, although the form of central bank instruments and current methods for implementing monetary policy may change, the goals that the policy makers try to achieve by employing these instruments remain valid, and achievable.

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Bibliographic Info

Paper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0032.

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Date of creation: 2001
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Handle: RePEc:dgr:vuarem:2001-32

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Web page: http://www.feweb.vu.nl

Related research

Keywords: electronic money; new economy; monetary policy;

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  1. White, Lawrence H, 1984. "Competitive Payments Systems and the Unit of Account," American Economic Review, American Economic Association, vol. 74(4), pages 699-712, September.
  2. George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
  3. Berk, Jan Marc & Knot, Klaas H. W., 2001. "Testing for long horizon UIP using PPP-based exchange rate expectations," Journal of Banking & Finance, Elsevier, vol. 25(2), pages 377-391, February.
  4. Woodford, M., 1997. "Doing Without Money: Controlling Inflation in a Post-Monetary World," Papers 632, Stockholm - International Economic Studies.
  5. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Publishing.
  6. Arturo Estrella, 2002. "Securitization and the efficacy of monetary policy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 243-255.
  7. John B. Taylor, 1995. "The monetary transmission mechanism: an empirical framework," Working Papers in Applied Economic Theory 95-07, Federal Reserve Bank of San Francisco.
  8. Gordon Sellon, Jr. & Stuart E. Weiner, 1997. "Monetary policy without reserve requirements : case studies and options for the United States," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-30.
  9. Stephen D. Oliner & Daniel E. Sichel, 2000. "The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 3-22, Fall.
  10. Berentsen, Aleksander, 1998. "Monetary Policy Implications of Digital Money," Kyklos, Wiley Blackwell, vol. 51(1), pages 89-117.
  11. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-54, April.
  12. Gordon, Robert J, 1990. "What Is New-Keynesian Economics?," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1115-71, September.
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