Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-19T18:28:55.217Z Has data issue: false hasContentIssue false
  • English
  • Français

Mr. Woodford and the Challenge of Finance

Published online by Cambridge University Press:  11 June 2009

Perry Mehrling
Perry Mehrling
Affiliation:
Barnard College, Columbia University.
Get access Rights & Permissions [Opens in a new window]

Extract

Once one recognizes that many prices (and wages) are fairly sticky over short time intervals, the arbitrariness of the path of nominal prices (in the sense of their under-determination by real factors alone) implies that the path of real activity and the associated path of equilibrium real interest rates are equally arbitrary. It is equally possible, from a logical standpoint, to imagine allowing the central bank to determine, by arbitrary fiat, the path of aggregate real activity, or the path of real interest rates, as it is to imagine allowing it to determine the path of nominal interest rates. In practice, it is easiest for central banks to exert relatively direct control over overnight nominal interest rates, and so they generally formulate their short-run objectives (their operating target) in terms of the effect that they seek to bring about in this variable rather than in one of the others.

Type
Research Article
Information
Journal of the History of Economic Thought , Volume 28 , Issue 2 , June 2006 , pp. 161 - 170
Copyright
Copyright © The History of Economics Society 2006

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Black, Fischer (1970) Banking in a World Without Money: The Effects of Uncontrolled Banking, Journal of Bank Research, 1 (Autumn), pp. 9–20, reprinted as chapter 1 in: Fischer Black Business Cycles and Equilibrium (Cambridge, MA: Basil Blackwell, 1987).Google Scholar
Black, Fischer (1987) Business Cycles and Equilibrium (Cambridge, MA: Basil Blackwell).Google Scholar
Calvo, Guillermo (1983) Staggered Prices in a Utility-Maximizing Framework, Journal of Monetary Economics, 12 (3), pp. 383–98.Google Scholar
Hall, Robert (2002) Controlling the Price Level, Contributions to Macroeconomics, 2 (1), article 5, www.bepress.com.Google Scholar
Lucas, Robert (1976) Econometric Policy Evaluation: A Critique, Carnegie Rochester Series on Public Policy, in: The Phillips Curve and Labor Markets, edited by Brunner, Karl and Meltzer, Allan H., Carnegie-Rochester Series on Public Policy, Vol. 1 (Amsterdam: North Holland).Google Scholar
Wicksell, Knut (1898) Interest and Prices, Kahn, R. F. (Trans) (London: Macmillan, for the Royal Economic Society, 1936).Google Scholar
Woodford, Michael (2001) Monetary Policy in the Information Economy, in: Economic Policy for the Information Economy (Kansas City: Federal Reserve Bank of Kansas City).Google Scholar
Woodford, Michael (2003) Interest and Prices: Foundations of a Theory of Monetary Policy (Princeton, NJ: Princeton University Press).Google Scholar