Monetary Policy Analysis in Models Without Money

41 Pages Posted: 16 Mar 2001 Last revised: 25 Jun 2001

See all articles by Bennett T. McCallum

Bennett T. McCallum

Carnegie Mellon University - David A. Tepper School of Business; National Bureau of Economic Research (NBER)

Date Written: March 2001

Abstract

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.

Suggested Citation

McCallum, Bennett T., Monetary Policy Analysis in Models Without Money (March 2001). NBER Working Paper No. w8174, Available at SSRN: https://ssrn.com/abstract=263436

Bennett T. McCallum (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

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