Central Bank Interest-Rate Control in a Cashless, Arrow-Debreu Economy: A Comment on Wallace

Colin Rogers ()
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Colin Rogers: School of Economics, University of Adelaide

No 2006-04, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: Wallace attempts to analyse central bank interest rate control in a cashless, Arrow-Debreu economy. The model incorporates only the unit of account function of money and exhibits a version of the classical dichotomy in which arbitrary accounting prices are independent of the equilibrium real relative price vector. A model with these properties is incapable of providing a theory of the price level or inflation, nominal interest rate rules or justifying a role for the central bank. Nominal magnitudes are nominal in name only and Wallace's analysis is without theoretical foundations. It generates a series of conceptual and logical puzzles.

Keywords: cashless; Arrow-Debreu economy; accounting prices (search for similar items in EconPapers)
Pages: 20 pages
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2006-04

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