Central Bank Interest-Rate Control in a Cashless, Arrow-Debreu economy: A Comment on Wallace
نویسنده
چکیده
Wallace attempts to analyse central bank interest rate control in a cashless, ArrowDebreu 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. First Draft Feb 2005. Revised January 2006. JEL classification:
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