Monetary Theory and Policy

This text presents an advanced treatment of critical topics in monetary economics and the models economists use to investigate the interactions between real and monetary factors. It provides extensive coverage of general equilibrium models of money, models of the short-run real effects of monetary policy, and game-theoretic approaches to monetary policy. Among the topics covered are money-in-the-utility-function models, cash-in-advance models, money and public finance, the credit channel of money, models of time inconsistency, monetary policy operating procedures, and interest rates and monetary policy.

The book has three aspects. It uses dynamic simulations to evaluate quantitatively the significance of the channels through which monetary policy and inflation affect the economy. It examines modern approaches to monetary policy that stress the incentives facing central banks and the strategic interactions between central banks and the private sector.

The book focuses on the implications of interest rate control for monetary policy. The book is designed for second-year graduate students specializing in monetary economics, for economic researchers in need of a systematic summary of recent developments in the field, for economists working in policy institutions, and for central bank staff economists.