Monetary Policy Analysis in Models Without Money
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NBER Working Paper No. 8174
Issued in March 2001
NBER Program(s): EFG ME
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.
Published: McCallum, Bennett T. "Recent Developments In Monetary Policy Analysis: The Roles Of Theory And Evidence," FRB Richmond - Economic Review, 2002, v88(1,Winter), 67-96.
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