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How Important Is Money in the Conduct of Monetary Policy?

Michael Woodford ()

Journal of Money, Credit and Banking, 2008, vol. 40, issue 8, 1561-1598

Abstract: I consider some of the leading arguments for assigning an important role to tracking the growth of monetary aggregates when making decisions about monetary policy. First, I consider whether ignoring money means returning to the conceptual framework that allowed the high inflation of the 1970s. Second, I consider whether models of inflation determination with no role for money are incomplete, or inconsistent with elementary economic principles. Third, I consider the implications for monetary policy strategy of the empirical evidence for a long‐run relationship between money growth and inflation. And fourth, I consider reasons why a monetary policy strategy based solely on short‐run inflation forecasts derived from a Phillips curve may not be a reliable way of controlling inflation. I argue that none of these considerations provides a compelling reason to assign a prominent role to monetary aggregates in the conduct of monetary policy.

Date: 2008
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https://doi.org/10.1111/j.1538-4616.2008.00175.x

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Journal Article: How Important Is Money in the Conduct of Monetary Policy? (2008)
Working Paper: How Important is Money in the Conduct of Monetary Policy? (2007) Downloads
Working Paper: How Important is Money in the Conduct of Monetary Policy? (2007) Downloads
Working Paper: How Important is Money in the Conduct of Monetary Policy? (2007) Downloads
Working Paper: How Important Is Money In The Conduct Of Monetary Policy? (2006) Downloads
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