Some issues in monetary economics

Abstract

Basic issues in monetary theory are presently being debated and increasing attention is being directed to a number of rather technical questions. Moreover, the growing interest among monetary theorists in defining instrument and policy variables that are genuinely exogenous, and in developing indicators, targets and operating guides for monetary authorities reflects the sharply different views of monetary policy and its role in recent stabilisation policy. The present paper takes up some of these issues. The author first considers whether the central bank can actually control the money stock. The question of whether changes in the (nominal) money stock are identifiable with changes in real cash balances, and whether movements in market interest rates adequately reflect movements in real rates is then dealt with. The third question taken up concerns the analytical structure and policy implications of the non-monetary theories of the price level. Finally, the author looks at how to define and measure the monetary and fiscal effects that follow a particular policy. JEL: E31, E43, E52, E58

Keywords

• Monetary theory
• stabilisation policy
• central banks
• money stock
• interest rates
• price level