EconLit Content Type: Working Papers in Economics


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Sample EconLit Working Paper Record


TITLE: Monetary Policy without Money: Hamlet without the Ghost


AUTHOR: Laidler, David


AFFILIATION: University of Western Ontario


SOURCE: University of Western Ontario, Department of Economics, UWO Department of Economics Working Papers: 20037


DOCUMENT TYPE: Working Paper


DATE: 2003


ABSTRACT: Today's standard model of monetary policy has aggregate demand responding directly to an interest rate under the central bank's control, and ignores the role played by the quantity of money in the transmission mechanism. Even though monetary policy is usually aimed at controlling price level behaviour, and the price level is appropriately modelled as being determined by the interaction of the supply and demand for money, it is going too far to characterise this standard model as "Hamlet without the prince". Canadian experience shows that the current framework has worked too well, and its predecessor, based on money growth targeting, worked too badly for this to be fair. Nevertheless, inflation is a monetary phenomenon, and monetary aggregates continue to have useful leading indicator properties. These facts, among others, suggest that a theory of monetary policy which pays explicit attention to the money supply permits a coherent understanding of monetary policy issues. The neglect of money by current approaches leads to a fragmented analysis of monetary policy, just as the omission of the Ghost's demand for vengeance from a production of Hamlet would undermine the play's coherence.


AVAILABILITY: http://www.ssc.uwo.ca/economics/econref/html/WP2003/wp2003_7.pdf


COPYRIGHT / ATTRIBUTION: Information provided in collaboration with the RePEc Project: http://repec.org


UPDATE: 200404


ACCESSION NUMBER: 0726079