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Monetary policy analysis in models without money

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  • Bennett T. McCallum

Abstract

The following arguments are developed: (i) models without monetary aggregates do not imply that inflation is a non-monetary phenomenon and are not necessarily non-monetary models; (ii) theoretical considerations suggest that such models are misspecified, but the quantitative significance of this misspecification is very small; (iii) some prominent arguments based on indeterminacy' findings are of dubious merit: there are reasons for believing that findings of solution multiplicity are theoretical curiosities that have no real world significance; (iv) monetary policy rules that violate the Taylor principle, by contrast, possess another characteristic the absence of E-stability that suggests undesirable behavior in practice.
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  • Bennett T. McCallum, 2001. "Monetary policy analysis in models without money," Review, Federal Reserve Bank of St. Louis, vol. 83(Jul), pages 145-164.
  • Handle: RePEc:fip:fedlrv:y:2001:i:jul:p:145-164:n:v.83no.4
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    More about this item

    Keywords

    Monetary policy;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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