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The Liquidity Trap and the Pigou Effect : A Dynamic Analysis with Rational Expectations

McCallum, Bennett T. - 2021

economy may lack--despite price flexibility--automatic market mechanisms that tend to eliminate excess supplies of labor. The …") of an economy that has been shocked away from full employment. The present paper develops a dynamic analysis, in a rather …'s suggestion that, because of expectational effects, such an economy could be unstable. Also considered is Martin J. Bailey …

Persistent link: https://www.econbiz.de/10013223894

Multiple-Solution Indeterminacies in Monetary Policy Analysis

McCallum, Bennett T. - 2021

This paper discusses four current topics in monetary policy analysis, each of which hinges on the possibility of multiple solutions in rational expectations (RE) models. In three of these cases--involving inflation forecast targeting, the zero-lower bound deflation trap, and the fiscal theory of...

Persistent link: https://www.econbiz.de/10013227186

Two Fallacies Concerning Central Bank Independence

McCallum, Bennett T. - 2021

This paper takes issue with two basic conclusions prevalent in the literature on central bank behavior. First, the paper argues that it is inappropriate to presume that central banks will, in the absence of any precommitment technology, necessarily behave in a 'discretionary' fashion that...

Persistent link: https://www.econbiz.de/10013227865

On Consequences and Criticisms of Monetary Targeting

McCallum, Bennett T. - 2021

The purpose of this paper is to review and evaluate the most important existing criticisms of policy strategies that feature adherence to money stock targets. Four main categories of criticism (and counterargumerits) are analyzed. The first of these involves the claim that accurate money stock...

Persistent link: https://www.econbiz.de/10013228267

Monetary Policy Analysis in Models Without Money

McCallum, Bennett T. - 2021

The following arguments are developed: (i) models without monetary aggregates do not imply that inflation is a non-monetary phenomenon and are not necessarily non-monetary models; (ii) theoretical considerations suggest that such models are misspecified, but the quantitative significance of this...

Persistent link: https://www.econbiz.de/10013230177

Monetary Policy Rules and Financial Stability

McCallum, Bennett T. - 2021

This paper investigates empirically the possibility that a central bank could adhere to a macro-oriented monetary policy rule while also providing lender-of-last-resort services to the financial system. The method considered involves smoothing week-to-week movements of an interest rate...

Persistent link: https://www.econbiz.de/10013230980

The Non-Optimality of Proposed Monetary Policy Rules Under Timeless-Perspective Commitment

Jensen, Christian; McCallum, Bennett T. - 2021

Several recent papers have usefully emphasized the inefficiency that arises from discretionary monetary policymaking, relative to optimal policy from a 'timeless perspective,' in macroeconomic models with forward-looking private behavior. The inefficiency in question is in terms of average...

Persistent link: https://www.econbiz.de/10013234034

The Present and Future of Monetary Policy Rules

McCallum, Bennett T. - 2021

To consider the prospects, looking 20-30 years into the future, for monetary policymaking in accordance with policy rules, one must evaluate their present importance. That requires some definition of what constitutes rule-based monetary policy in practice, since no actual central bank will ever...

Persistent link: https://www.econbiz.de/10013246648

Credibility and Monetary Policy

McCallum, Bennett T. - 2021

monetary policy, with special emphasis given to matters pertaining to the U.S. economy and the practices and procedures of the …

Persistent link: https://www.econbiz.de/10013249704

Analysis of the Monetary Transmission Mechanism : Methodological Issues

McCallum, Bennett T. - 2021

regarded as policy-invariant. By use of an illustrative open- economy structural model based on optimizing analysis, and …

Persistent link: https://www.econbiz.de/10013212576