Handbook of Monetary Economics 3A
- 1st Edition, Volume 3A - December 8, 2010
- Latest edition
- Editors: Benjamin M. Friedman, Michael Woodford
- Language: English
What tools are available for setting and analyzing monetary policy? World-renowned contributors examine recent evidence on subjects as varied as price-setting, inflation… Read more
What tools are available for setting and analyzing monetary policy? World-renowned contributors examine recent evidence on subjects as varied as price-setting, inflation persistence, the private sector's formation of inflation expectations, and the monetary policy transmission mechanism. Stopping short of advocating conclusions about the ideal conduct of policy, the authors focus instead on analytical methods and the changing interactions among the ingredients and properties that inform monetary models. The influences between economic performance and monetary policy regimes can be both grand and muted, and this volume clarifies the present state of this continually evolving relationship.
- Explores the models and practices used in formulating and transmitting monetary policies
- Raises new questions about the volume, price, and availability of credit in the 2007-2010 downturn
- Questions fiscal-monetary connnections and encourages new thinking about the business cycle itself
- Observes changes in the formulation of monetary policies over the last 25 years
Graduate students through professionals worldwide working in all fields of economics and finance, and particularly in subfields related to labor economics
INTRODUCTION TO THE SERIES
CONTRIBUTORS
PREFACE
Part One: Foundations: The Role of Money in the Economy
1: The Mechanism-Design Approach to Monetary Theory
Abstract
1 INTRODUCTION
2 SOME FRICTIONS
3 AN ILLUSTRATIVE MODEL WITH PERFECT RECOGNIZABILITY
4 IMPERFECT RECOGNIZABILITY AND UNIFORM CURRENCY
5 OPTIMA UNDER A UNIFORM OUTSIDE CURRENCY
6 EXTENSIONS OF THE ILLUSTRATIVE MODEL
7 CONCLUDING REMARKS
2: New Monetarist Economics: Models
Abstract
1 INTRODUCTION
2 BASIC MONETARY THEORY
3 A BENCHMARK MODEL
4 NEW MODELS OF OLD IDEAS
5 MONEY, PAYMENTS, AND BANKING
6 FINANCE
7 CONCLUSION
3: Money and Inflation: Some Critical Issues
Abstract
1 INTRODUCTION
2 THE QUANTITY THEORY OF MONEY
3 RELATED CONCEPTS
4 HISTORICAL BEHAVIOR OF MONETARY AGGREGATES
5 FLAWED EVIDENCE ON MONEY GROWTH-INFLATION RELATIONS
6 MONEY GROWTH AND INFLATION IN TIME SERIES DATA
7 IMPLICATIONS OF A DIMINISHING ROLE FOR MONEY
8 MONEY VERSUS INTEREST RATES IN PRICE LEVEL ANALYSIS
9 CONCLUSIONS
APPENDIX: DATA SOURCES
Part Two: Foundations: Information and Adjustment
4: Rational Inattention and Monetary Economics
Abstract
1 MOTIVATION
2 INFORMATION THEORY
3 INFORMATION THEORY AND ECONOMIC BEHAVIOR
4 IMPLICATIONS FOR MACROECONOMIC MODELING
5 IMPLICATIONS FOR MONETARY POLICY
6 DIRECTIONS FOR PROGRESS
7 CONCLUSION
APPENDIX
5: Imperfect Information and Aggregate Supply
Abstract
1 INTRODUCTION
2 THE BASELINE MODEL OF AGGREGATE SUPPLY
3 FOUNDATIONS OF IMPERFECT-INFORMATION AND AGGREGATE-SUPPLY MODELS
4 PARTIAL AND DELAYED INFORMATION MODELS: COMMON PREDICTIONS
5 PARTIAL AND DELAYED INFORMATION MODELS: NOVEL PREDICTIONS
6 MICROFOUNDATIONS OF INCOMPLETE INFORMATION
7 THE RESEARCH FRONTIER
8 CONCLUSION
6: Microeconomic Evidence on Price-Setting
Abstract
1 INTRODUCTION
2 DATA SOURCES
3 FREQUENCY OF PRICE CHANGES
4 SIZE OF PRICE CHANGES
5 DYNAMIC FEATURES OF PRICE CHANGES
6 TEN FACTS AND IMPLICATIONS FOR MACRO MODELS
7 CONCLUSION
Part Three: Models of the Monetary Transmission Mechanism
7: DSGE Models for Monetary Policy Analysis
Abstract
1 INTRODUCTION
2 SIMPLE MODEL
3 SIMPLE MODEL: SOME IMPLICATIONS FOR MONETARY POLICY
4 MEDIUM-SIZED DSGE MODEL
5 ESTIMATION STRATEGY
6 MEDIUM-SIZED DSGE MODEL: RESULTS
7 CONCLUSION
8: How Has the Monetary Transmission Mechanism Evolved Over Time?
Abstract
1 INTRODUCTION
2 THE CHANNELS OF MONETARY TRANSMISSION
3 WHY THE MONETARY TRANSMISSION MECHANISM MAY HAVE CHANGED
4 HAS THE EFFECT OF MONETARY POLICY ON THE ECONOMY CHANGED? AGGREGATE EVIDENCE
5 WHAT CAUSED THE MONETARY TRANSMISSION MECHANISM TO EVOLVE?
6 IMPLICATIONS FOR THE FUTURE CONDUCT OF MONETARY POLICY
APPENDIX
9: Inflation Persistence
Abstract
1 INTRODUCTION
2 DEFINING AND MEASURING REDUCED-FORM INFLATION PERSISTENCE
3 STRUCTURAL SOURCES OF PERSISTENCE
4 INFERENCE ABOUT PERSISTENCE IN SMALL SAMPLES: “ANCHORED EXPECTATIONS” AND THEIR IMPLICATIONS FOR INFLATION PERSISTENCE
5 MICROECONOMIC EVIDENCE ON PERSISTENCE
6 CONCLUSIONS
10: Monetary Policy and Unemployment
Abstract
1 INTRODUCTION
2 EVIDENCE ON THE CYCLICAL BEHAVIOR OF LABOR MARKET VARIABLES AND INFLATION
3 A MODEL WITH NOMINAL RIGIDITIES AND LABOR MARKET FRICTIONS
4 EQUILIBRIUM DYNAMICS: THE EFFECTS OF MONETARY POLICY AND TECHNOLOGY SHOCKS
5 LABOR MARKET FRICTIONS, NOMINAL RIGIDITIES AND MONETARY POLICY DESIGN
6 POSSIBLE EXTENSIONS
7 CONCLUSIONS
APPENDIX 1
APPENDIX 2
APPENDIX 3
APPENDIX 4
11: Financial Intermediation and Credit Policy in Business Cycle Analysis
Abstract
1 INTRODUCTION
2 A CANONICAL MODEL OF FINANCIAL INTERMEDIATION AND BUSINESS FLUCTUATIONS
3 CREDIT POLICIES
4 CRISIS SIMULATIONS AND POLICY EXPERIMENTS
5 ISSUES AND EXTENSIONS
6 CONCLUDING REMARKS
APPENDIX 1
APPENDIX 2
12: Financial Intermediaries and Monetary Economics
Abstract
1 INTRODUCTION
2 FINANCIAL INTERMEDIARIES AND THE PRICE OF RISK
3 CHANGING NATURE OF FINANCIAL INTERMEDIATION
4 EMPIRICAL RELEVANCE OF FINANCIAL INTERMEDIARY BALANCE SHEETS
5 CENTRAL BANK AS LENDER OF LAST RESORT
6 ROLE OF SHORT-TERM INTEREST RATES
7 CONCLUDING REMARKS
APPENDIX
INDEX-VOLUME 3A
INDEX-VOLUME 3B
CONTRIBUTORS
PREFACE
Part One: Foundations: The Role of Money in the Economy
1: The Mechanism-Design Approach to Monetary Theory
Abstract
1 INTRODUCTION
2 SOME FRICTIONS
3 AN ILLUSTRATIVE MODEL WITH PERFECT RECOGNIZABILITY
4 IMPERFECT RECOGNIZABILITY AND UNIFORM CURRENCY
5 OPTIMA UNDER A UNIFORM OUTSIDE CURRENCY
6 EXTENSIONS OF THE ILLUSTRATIVE MODEL
7 CONCLUDING REMARKS
2: New Monetarist Economics: Models
Abstract
1 INTRODUCTION
2 BASIC MONETARY THEORY
3 A BENCHMARK MODEL
4 NEW MODELS OF OLD IDEAS
5 MONEY, PAYMENTS, AND BANKING
6 FINANCE
7 CONCLUSION
3: Money and Inflation: Some Critical Issues
Abstract
1 INTRODUCTION
2 THE QUANTITY THEORY OF MONEY
3 RELATED CONCEPTS
4 HISTORICAL BEHAVIOR OF MONETARY AGGREGATES
5 FLAWED EVIDENCE ON MONEY GROWTH-INFLATION RELATIONS
6 MONEY GROWTH AND INFLATION IN TIME SERIES DATA
7 IMPLICATIONS OF A DIMINISHING ROLE FOR MONEY
8 MONEY VERSUS INTEREST RATES IN PRICE LEVEL ANALYSIS
9 CONCLUSIONS
APPENDIX: DATA SOURCES
Part Two: Foundations: Information and Adjustment
4: Rational Inattention and Monetary Economics
Abstract
1 MOTIVATION
2 INFORMATION THEORY
3 INFORMATION THEORY AND ECONOMIC BEHAVIOR
4 IMPLICATIONS FOR MACROECONOMIC MODELING
5 IMPLICATIONS FOR MONETARY POLICY
6 DIRECTIONS FOR PROGRESS
7 CONCLUSION
APPENDIX
5: Imperfect Information and Aggregate Supply
Abstract
1 INTRODUCTION
2 THE BASELINE MODEL OF AGGREGATE SUPPLY
3 FOUNDATIONS OF IMPERFECT-INFORMATION AND AGGREGATE-SUPPLY MODELS
4 PARTIAL AND DELAYED INFORMATION MODELS: COMMON PREDICTIONS
5 PARTIAL AND DELAYED INFORMATION MODELS: NOVEL PREDICTIONS
6 MICROFOUNDATIONS OF INCOMPLETE INFORMATION
7 THE RESEARCH FRONTIER
8 CONCLUSION
6: Microeconomic Evidence on Price-Setting
Abstract
1 INTRODUCTION
2 DATA SOURCES
3 FREQUENCY OF PRICE CHANGES
4 SIZE OF PRICE CHANGES
5 DYNAMIC FEATURES OF PRICE CHANGES
6 TEN FACTS AND IMPLICATIONS FOR MACRO MODELS
7 CONCLUSION
Part Three: Models of the Monetary Transmission Mechanism
7: DSGE Models for Monetary Policy Analysis
Abstract
1 INTRODUCTION
2 SIMPLE MODEL
3 SIMPLE MODEL: SOME IMPLICATIONS FOR MONETARY POLICY
4 MEDIUM-SIZED DSGE MODEL
5 ESTIMATION STRATEGY
6 MEDIUM-SIZED DSGE MODEL: RESULTS
7 CONCLUSION
8: How Has the Monetary Transmission Mechanism Evolved Over Time?
Abstract
1 INTRODUCTION
2 THE CHANNELS OF MONETARY TRANSMISSION
3 WHY THE MONETARY TRANSMISSION MECHANISM MAY HAVE CHANGED
4 HAS THE EFFECT OF MONETARY POLICY ON THE ECONOMY CHANGED? AGGREGATE EVIDENCE
5 WHAT CAUSED THE MONETARY TRANSMISSION MECHANISM TO EVOLVE?
6 IMPLICATIONS FOR THE FUTURE CONDUCT OF MONETARY POLICY
APPENDIX
9: Inflation Persistence
Abstract
1 INTRODUCTION
2 DEFINING AND MEASURING REDUCED-FORM INFLATION PERSISTENCE
3 STRUCTURAL SOURCES OF PERSISTENCE
4 INFERENCE ABOUT PERSISTENCE IN SMALL SAMPLES: “ANCHORED EXPECTATIONS” AND THEIR IMPLICATIONS FOR INFLATION PERSISTENCE
5 MICROECONOMIC EVIDENCE ON PERSISTENCE
6 CONCLUSIONS
10: Monetary Policy and Unemployment
Abstract
1 INTRODUCTION
2 EVIDENCE ON THE CYCLICAL BEHAVIOR OF LABOR MARKET VARIABLES AND INFLATION
3 A MODEL WITH NOMINAL RIGIDITIES AND LABOR MARKET FRICTIONS
4 EQUILIBRIUM DYNAMICS: THE EFFECTS OF MONETARY POLICY AND TECHNOLOGY SHOCKS
5 LABOR MARKET FRICTIONS, NOMINAL RIGIDITIES AND MONETARY POLICY DESIGN
6 POSSIBLE EXTENSIONS
7 CONCLUSIONS
APPENDIX 1
APPENDIX 2
APPENDIX 3
APPENDIX 4
11: Financial Intermediation and Credit Policy in Business Cycle Analysis
Abstract
1 INTRODUCTION
2 A CANONICAL MODEL OF FINANCIAL INTERMEDIATION AND BUSINESS FLUCTUATIONS
3 CREDIT POLICIES
4 CRISIS SIMULATIONS AND POLICY EXPERIMENTS
5 ISSUES AND EXTENSIONS
6 CONCLUDING REMARKS
APPENDIX 1
APPENDIX 2
12: Financial Intermediaries and Monetary Economics
Abstract
1 INTRODUCTION
2 FINANCIAL INTERMEDIARIES AND THE PRICE OF RISK
3 CHANGING NATURE OF FINANCIAL INTERMEDIATION
4 EMPIRICAL RELEVANCE OF FINANCIAL INTERMEDIARY BALANCE SHEETS
5 CENTRAL BANK AS LENDER OF LAST RESORT
6 ROLE OF SHORT-TERM INTEREST RATES
7 CONCLUDING REMARKS
APPENDIX
INDEX-VOLUME 3A
INDEX-VOLUME 3B
"This volume is a must for anyone interested in the current state of the development of monetary theory as viewed by the community of most of the distinguished monetary economists. Both the work on monetary theory and the understanding of its importance have exploded in the last 20 years. This valuable compendium shows the enormous and detailed developments made recently. It highlights the problems in blending theory with institutions. It is a contribution of note."— Martin Shubik, Yale University
"Monetary Economics has made great strides since the HANDBOOK OF MONETARY ECONOMICS, Volumes 1 and 2 was published. In Volumes 3A and 3B you will find surveys, written by leaders in their fields, of new work on foundations, the transmission mechanism, adaptive learning and expectation formation, optimal monetary policy, constraints on monetary policy, robustness in macroeconomics, monetary policy in practice, and much more, as well as applications to the latest crises. Every economist will want these volumes placed within easy reach on their bookshelf."— William A. Brock, University of Wisconsin, Madison
"Monetary Economics has made great strides since the HANDBOOK OF MONETARY ECONOMICS, Volumes 1 and 2 was published. In Volumes 3A and 3B you will find surveys, written by leaders in their fields, of new work on foundations, the transmission mechanism, adaptive learning and expectation formation, optimal monetary policy, constraints on monetary policy, robustness in macroeconomics, monetary policy in practice, and much more, as well as applications to the latest crises. Every economist will want these volumes placed within easy reach on their bookshelf."— William A. Brock, University of Wisconsin, Madison
- Edition: 1
- Latest edition
- Volume: 3A
- Published: December 8, 2010
- Language: English
BF
Benjamin M. Friedman
Affiliations and expertise
Harvard University, Cambridge, MA, USAMW
Michael Woodford
Michael Woodford is the John Bates Clark Professor of Political Economy at Columbia University. His first academic appointment was at Columbia in 1984, after which he held positions at the University of Chicago and Princeton University, before returning to Columbia in 2004. He received his A.B. from the University of Chicago, his J.D. from Yale Law School, and his Ph.D. in Economics from the Massachusetts Institute of Technology. He has been a MacArthur Fellow and a Guggenheim Fellow, and is a Fellow of the American Academy of Arts and Sciences, as well as a Fellow of the Econometric Society, a Research Associate of the National Bureau of Economic Research (Cambridge, Mass.), and a Research Fellow of the Centre for Economic Policy Research (London). In 2007 he was awarded the Deutsche Bank Prize in Financial Economics. Woodford’s primary research interests are in macroeconomic theory and monetary policy. He has written extensively about the microeconomic foundations of the monetary transmission mechanism, the role of interest rates in inflation determination, rules for the conduct of monetary policy, central-bank communication policy, interactions between monetary and fiscal policy, and the consequences of electronic payments for monetary control. His most important work is the treatise Interest and Prices: Foundations of a Theory of Monetary Policy, recipient of the 2003 Association of American Publishers Award for Best Professional/Scholarly Book in Economics. He is the co-editor of the Handbook in Economics series.
Affiliations and expertise
Professor, Columbia University, New York, NY, USA