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Handbook of Monetary Economics - 1st Edition - ISBN: 9780444534545, 9780444534552

Handbook of Monetary Economics, Volume 3B

1st Edition

Editors: Benjamin Friedman Michael Woodford
Hardcover ISBN: 9780444534545
eBook ISBN: 9780444534552
Imprint: North Holland
Published Date: 16th November 2010
Page Count: 968
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Table of Contents

    <li>Preface</li> <li>Part Four: Optimal Monetary Policy<ul><li>Chapter 13: The Optimal Rate of Inflation<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 MONEY DEMAND AND THE OPTIMAL RATE OF INFLATION</li><li>3 MONEY DEMAND, FISCAL POLICY AND THE OPTIMAL RATE OF INFLATION</li><li>4 FAILURE OF THE FRIEDMAN RULE DUE TO UNTAXED INCOME: THREE EXAMPLES</li><li>5 A FOREIGN DEMAND FOR DOMESTIC CURRENCY AND THE OPTIMAL RATE OF INFLATION</li><li>6 STICKY PRICES AND THE OPTIMAL RATE OF INFLATION</li><li>7 THE FRIEDMAN RULE VERSUS PRICE-STABILITY TRADE-OFF</li><li>8 DOES THE ZERO BOUND PROVIDE A RATIONALE FOR POSITIVE INFLATION TARGETS?</li><li>9 DOWNWARD NOMINAL RIGIDITY</li><li>10 QUALITY BIAS AND THE OPTIMAL RATE OF INFLATION</li><li>11 CONCLUSION</li><li>APPENDIX</li></ul></li><li>Chapter 14: Optimal Monetary Stabilization Policy<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 OPTIMAL POLICY IN A CANONICAL NEW KEYNESIAN MODEL</li><li>3 STABILIZATION AND WELFARE</li><li>4 GENERALIZATIONS OF THE BASIC MODEL</li><li>5 RESEARCH AGENDA</li></ul></li><li>Chapter 15: Simple and Robust Rules for Monetary Policy<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 HISTORICAL BACKGROUND</li><li>3 USING MODELS TO EVALUATE SIMPLE POLICY RULES</li><li>4 ROBUSTNESS OF POLICY RULES</li><li>5 OPTIMAL POLICY VERSUS SIMPLE RULES</li><li>6 LEARNING FROM EXPERIENCE BEFORE, DURING AND AFTER THE GREAT MODERATION</li><li>7 CONCLUSION</li></ul></li><li>Chapter 16: Optimal Monetary Policy in Open Economies<ul><li>Abstract</li><li>1 INTRODUCTION AND OVERVIEW</li><li>PART I: OPTIMAL STABILIZATION POLICY AND INTERNATIONAL RELATIVE PRICES WITH FRICTIONLESS ASSET MARKETS</li><li>2 A BASELINE MONETARY MODEL OF MACROECONOMIC INTERDEPENDENCE</li><li>3 THE CLASSICAL VIEW: DIVINE COINCIDENCE IN OPEN ECONOMIES</li><li>4 SKEPTICISM ON THE CLASSICAL VIEW: LOCAL CURRENCY PRICE STABILITY OF IMPORTS</li><li>5 DEVIATIONS FROM POLICY COOPERATION AND CONCERNS WITH &#x201C;COMPETITIVE DEVALUATIONS&#x201D;</li><li>PART II: CURRENCY MISALIGNMENTS AND CROSS-COUNTRY DEMAND IMBALANCES</li><li>6 MACROECONOMIC INTERDEPENDENCE UNDER ASSET MARKET IMPERFECTIONS</li><li>7 CONCLUSIONS</li></ul></li></ul></li> <li>Part Five: Constraints on Monetary Policy<ul><li>Chapter 17: The Interaction Between Monetary and Fiscal Policy<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 POSITIVE THEORY OF PRICE STABILITY</li><li>3 NORMATIVE THEORY OF PRICE STABILITY: IS PRICE STABILITY OPTIMAL?</li></ul></li><li>Chapter 18: The Politics of Monetary Policy<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 RULES VERSUS DISCRETION</li><li>3 CENTRAL BANK INDEPENDENCE</li><li>4 POLITICAL BUSINESS CYCLES</li><li>5 CURRENCY UNIONS</li><li>6 THE EURO</li><li>7 CONCLUSION</li><li>APPENDIX</li></ul></li><li>Chapter 19: Inflation Expectations, Adaptive Learning and Optimal Monetary Policy<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 RECENT DEVELOPMENTS IN PRIVATE-SECTOR INFLATION EXPECTATIONS</li><li>3 A SIMPLE NEW KEYNESIAN MODEL OF INFLATION DYNAMICS UNDER RATIONAL EXPECTATIONS</li><li>4 MONETARY POLICY RULES AND STABILITY UNDER ADAPTIVE LEARNING</li><li>5 OPTIMAL MONETARY POLICY UNDER ADAPTIVE LEARNING</li><li>6 SOME FURTHER REFLECTIONS</li><li>7 CONCLUSIONS</li></ul></li><li>Chapter 20: Wanting Robustness in Macroeconomics<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 KNIGHT, SAVAGE, ELLSBERG, GILBOA-SCHMEIDLER, AND FRIEDMAN</li><li>3 FORMALIZING A TASTE FOR ROBUSTNESS</li><li>4 CALIBRATING A TASTE FOR ROBUSTNESS</li><li>5 LEARNING</li><li>6 ROBUSTNESS IN ACTION</li><li>7 CONCLUDING REMARKS</li><li>APPENDIX</li></ul></li></ul></li> <li>Part Six: Monetary Policy in Practice<ul><li>Chapter 21: Monetary Policy Regimes and Economic Performance: The Historical Record, 1979&#x2013;2008<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 MONETARY TARGETRY, 1979&#x2013;1982</li><li>3 INFLATION TARGETS</li><li>4 THE &#x201C;NICE YEARS,&#x201D; 1993&#x2013;2006</li><li>5 EUROPE AND THE TRANSITION TO THE EURO</li><li>6 JAPAN</li><li>7 FINANCIAL STABILITY AND MONETARY POLICY DURING THE FINANCIAL CRISIS</li><li>8 CONCLUSIONS AND IMPLICATIONS FOR FUTURE CENTRAL BANK POLICIES</li><li>APPENDIX</li></ul></li><li>Chapter 22: Inflation Targeting<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 HISTORY AND MACROECONOMIC EFFECTS</li><li>3 THEORY</li><li>4 PRACTICE</li><li>5 FUTURE</li></ul></li><li>Chapter 23: The Performance of Alternative Monetary Regimes<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 SOME SIMPLE EVIDENCE</li><li>3 PREVIOUS WORK ON INFLATION TARGETING</li><li>4 THE EURO</li><li>5 THE ROLE OF MONETARY AGGREGATES</li><li>6 HARD CURRENCY PEGS</li><li>7 CONCLUSION</li><li>APPENDIX</li></ul></li><li>Chapter 24: Implementation of Monetary Policy: How Do Central Banks Set Interest Rates?<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 FUNDAMENTAL ISSUES IN THE MODE OF WICKSELL</li><li>3 THE TRADITIONAL UNDERSTANDING OF &#x201C;HOW THEY DO THAT&#x201D;</li><li>4 OBSERVED RELATIONSHIPS BETWEEN RESERVES AND THE POLICY INTEREST RATE</li><li>5 HOW, THEN, DO CENTRAL BANKS SET INTEREST RATES?</li><li>6 EMPIRICAL EVIDENCE ON RESERVE DEMAND AND SUPPLY WITHIN THE MAINTENANCE PERIOD</li><li>7 NEW POSSIBILITIES FOLLOWING THE 2007&#x2013;2009 CRISIS</li><li>8 CONCLUSION</li></ul></li><li>Chapter 25: Monetary Policy in Emerging Markets<ul><li>Abstract</li><li>1 INTRODUCTION</li><li>2 WHY DO WE NEED DIFFERENT MODELS FOR EMERGING MARKETS?</li><li>3 GOODS MARKETS, PRICING, AND DEVALUATION</li><li>4 INFLATION</li><li>5 NOMINAL TARGETS FOR MONETARY POLICY</li><li>6 EXCHANGE RATE REGIMES</li><li>7 PROCYCLICALITY</li><li>8 CAPITAL FLOWS</li><li>9 Crises in emerging markets</li><li>10 SUMMARY OF CONCLUSIONS</li></ul></li></ul></li> <li>Index-Volume 3B</li> <li>Index-Volume 3A</li>


What are the goals of monetary policy and how are they transmitted?

Top scholars summarize recent evidence on the roles of money in the economy, the effects of information, and the growing importance of nonbank financial institutions. Their investigations lead to questions about standard presumptions about the rationality of asset markets and renewed interest in fiscal-monetary connections.  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.

Key Features

  • Presents extensive coverage of monetary policy theories with an eye toward questions raised by the recent financial crisis
  • Explores the ingredients, properties, and implications of models that inform monetary policy
  • 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.


No. of pages:
© North Holland 2011
16th November 2010
North Holland
Hardcover ISBN:
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This, the companion volume provides the counterpoint to the Monetary Analysis  writings in Volume 3A. Here the theme of macroeconomic engineering confronting politico-economic and socio-economic reality comes to the fore. The politics of monetary policy, inflation targeting, the clash between monetary and fiscal policy are all addressed. The question of robustness in macroeconomic policy making is considered. This volume provides a valuable source for those concerned with increasing our understanding of the links between theory and practice

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

Ratings and Reviews

About the Editors

Benjamin Friedman

Affiliations and Expertise

Harvard University, Cambridge, MA, USA

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

Columbia University, New York, NY, USA