Money as Friction: Conceptual Dissonance in Woodford's Interest and Prices
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 'friction', contra economic theory.
|Date of creation:||2008|
|Contact details of provider:|| Postal: Adelaide SA 5005|
Phone: (618) 8303 5540
Web page: http://www.economics.adelaide.edu.au/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:adl:wpaper:2008-03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Eran Binenbaum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.