The Art of Monetary Theory: A New Monetarist Perspective∗

Collateral Scarcity, Inflation, and the Policy Trap: A New Monetarist Perspective

We construct a model that captures New Monetarist ideas in order to explain post-Great Recession observations on inflation, nominal interest rates, and real interest rates. When finance constraints bind, the model can deliver low real interest rates and positive rates of inflation at the zero lower bound. Optimal monetary policy in the face of a financial crisis shock implies a positive nominal...

Monetary, Credit and (Other) Transmission Processes: A Monetarist Perspective

Liquidity, Monetary Policy, and the Financial Crisis: A New Monetarist Approach

A model of public and private liquidity is constructed that integrates financial intermediation theory with a New Monetarist monetary framework. Key features of the model are non-passive fiscal policy and costs of operating a currency system, which imply that an optimal policy deviates from the Friedman rule. A liquidity trap can exist in equilibrium away from the Friedman rule, and there exist...

New Monetarist Economics: Models

The purpose of this paper is to discuss some of the models used in New Monetarist Economics, which is our label for a body of recent work on money, banking, payments systems, asset markets, and related topics. A key principle in New Monetarism is that solid microfoundations are critical for understanding monetary issues. We survey recent papers on monetary theory, showing how they build on comm...

Stabilization, Accommodation, and Monetary Rules

A central feature of the monetarist approach to the problem of inflation is a preannounced gradual reduction in monetary growth. This reduction is to be sustained until a monetary growth consistent with a zero, or an acceptably low, target rate of inflation is reached. Thereafter, monetary growth is to be held constant at this new rate. The specifics of this prescription differ by the type of m...