Handbook of Monetary Economics 3A, Volume 3A

INTRODUCTION TO THE SERIES

CONTRIBUTORS

PREFACE

Part One: Foundations: The Role of Money in the Economy

Chapter 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

Chapter 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

Chapter 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

Chapter 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

Chapter 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

Chapter 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

Chapter 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

Chapter 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

Chapter 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

Chapter 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

Chapter 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

Chapter 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

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.