Doing Without Money: Controlling Inflation in a Post-Monetary World (1997)
| Venue: | Review of Economic Dynamics |
| Citations: | 42 - 8 self |
BibTeX
@ARTICLE{Woodford97doingwithout,
author = {Michael Woodford},
title = {Doing Without Money: Controlling Inflation in a Post-Monetary World},
journal = {Review of Economic Dynamics},
year = {1997},
volume = {1},
pages = {173--219}
}
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Abstract
Central banks now generally agree that conventional monetary aggregates are of little use as targets or even indicators for monetary policy, owing to the instability of money demand relations in economies with well-developed financial markets. But monetary theory has provided little guidance for the analysis of policies that are not formulated in terms of a path for the money supply, and a stable money demand relation is generally assumed as a central element of a theoretical analysis. This paper, instead, shows that it is possible to analyze equilibrium inflation determination without any reference to either money supply or demand, as long as one specifies policy in terms of a "Wicksellian" interest-rate feedback rule. The paper's central result is an approximation theorem, showing the existence, for a simple monetary model, of a well-behaved "cashless limit" in which the money balances held to facilitate transactions become negligible. The relations that determine equilib...
