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How Important is Money in the Conduct of Monetary Policy?

Michael Woodford ()

No 13325, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2007-08
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: ME EFG
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Published as Michael Woodford, 2008. "How Important Is Money in the Conduct of Monetary Policy?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1561-1598, December.

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Related works:
Journal Article: How Important Is Money in the Conduct of Monetary Policy? (2008)
Journal Article: How Important Is Money in the Conduct of Monetary Policy? (2008) 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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