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Reimagining the introductory material in teaching money creation and monetary policy

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  • Andre R. Neveu

Abstract

The money creation and monetary policy chapters in the leading introductory textbooks commonly present an outdated and misleading approach that is now largely irrelevant. A preferable model would help students understand that money and monetary policy are about bank and household motives, the importance of capital, and the role of credit. An updated approach would move beyond the current orthodoxy, which assumes both that the mechanical base-multiplier explains monetary policy and the quantity theory explains inflation. Monetary policy has evolved dramatically in the last 40 years. Therefore, textbook authors and teachers of introductory macroeconomics might consider some of these suggestions to help explain recent events.

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  • Andre R. Neveu, 2020. "Reimagining the introductory material in teaching money creation and monetary policy," The Journal of Economic Education, Taylor & Francis Journals, vol. 51(3-4), pages 297-316, August.
    • Handle: RePEc:taf:jeduce:v:51:y:2020:i:3-4:p:297-316
    DOI: 10.1080/00220485.2020.1804505
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    Cited by:

    1. Jane E. Ihrig & Scott A. Wolla, 2020. "Let's Close the Gap: Revising Teaching Materials to Reflect How the Federal Reserve Implements Monetary Policy," Finance and Economics Discussion Series 2020-092, Board of Governors of the Federal Reserve System (U.S.).

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