We study the Lagos and Wright (2005) model of monetary exchange in the laboratory. With a finite population of sufficiently patient agents, this model has a unique monetary equilibrium and a continuum of non-monetary gift exchange equilibria, some of which Pareto dominate the monetary equilibrium. We find that subjects avoid the gift-exchange equilibria in favor of the monetary equilibrium. We ...

We study the Lagos and Wright (2005) model of monetary exchange in the laboratory. With a finite population of sufficiently patient agents, this model has a unique monetary equilibrium and a continuum of non-monetary gift exchange equilibria, some of which Pareto dominate the monetary equilibrium. We find that subjects avoid the gift-exchange equilibria in favor of the monetary equilibrium. We ...

There has been a remarkable gulf between mainstream monetary theory and reality in recent decades. Amongst the worst examples are:(1) IS/LM: the monetary authorities set the monetary base, and the interest rate is determined in the market; (2) The monetary base multiplier of bank deposits, and the role of reserve ratios; (3) The current three equation neo-classical consensus, which not only ass...

the ultimate goal of monetary policy is to achieve price stability and high output. in this regard, central banks usually change the interest rate, liquidity, and money base in order to apply monetary policies. the john b. taylor rule is one of the rules known in the transmission of monetary policy.[1] based on this rule and given the output gap and inflation gap, the central bank increases or ...

This paper investigates the dynamic effects of monetary and fiscal policy in a monetary union, which is characterized by asymmetric interest rate transmission. This asymmetry gives rise to intertemporal reversals in the relative effectiveness of policy on member country outputs. The direction and the number of these reversals depend on whether policies are unanticipated or anticipated. We also ...

This paper examines what we have learned about monetary policy strategy and considers how we should change our thinking in this regard in the aftermath of the 2007-09 financial crisis. It starts with a discussion of where the science of monetary policy stood before the crisis and how central banks viewed monetary policy strategy. It then examines how the crisis has changed the thinking of both ...

On using monetary policy for macro-economic regulation, after the 1930s Great Depression when effective demand insufficiency emerges, Keynesianism proposes that proactive fiscal and easy monetary policies shall be introduced. His proposal is later adopted in Roosevelt’s New Deal, which greatly help USA climb out of economy recession and achieve prosperity over 20 years. After sub-prime mortgage...

t is an honor and a pleasure to have this opportunity, on the anniversary of Milton and Rose Friedman's popular classic, Free to Choose, to speak on Milton Friedman's monetary framework and his contributions to the theory and practice of monetary policy. About a year ago, I also had the honor, at a conference at the University of Chicago in honor of Milton's ninetieth birthday, to discuss the c...