Title:

How important is money in the conduct of monetary policy?

Author(s):

Woodford, Michael

Date:

2007

Type:

Working papers

Handle:

http://hdl.handle.net/10022/AC:P:433

Series:

Department of Economics Discussion Papers

Abstract:

I consider some of the leading arguments for assigning an important role to tracking the growth of monetary aggregates when making decisions about monetary policy. First, I consider whether ignoring money means returning to the conceptual framework that allowed the high inflation of the 1970s. Second, I consider whether models of inflation determination with no role for money are incomplete, or inconsistent with elementary economic principles. Third, I consider the implications for monetary policy strategy of the empirical evidence for a long-run relationship between money growth and inflation. And fourth, I consider reasons why a monetary policy strategy based solely on short-run inflation forecasts derived from a Phillips curve may not be a reliable way of controlling inflation. I argue that none of these considerations provides a compelling reason to assign a prominent role to monetary aggregates in the conduct of monetary policy.

Subject(s):

Economics
Finance

Item views:

130

Metadata:

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