Modern theory has delivered both the conservative central banker and the principal-agent approaches as rationales for the independence of the central bank. The principal-agent approach directs attention to the importance of both clearly defining the goals of the central bank and its command in...

The paper sets out and analyzes a simple model of money, banking, and price level determination. The model is first used to illustrate recent developments in the theory and analysis of banking, particularly the distinction between the portfolio management services provided by banks and their...

The paper considers three methods for eliminating the zero lower bound on nominal interest rates and thus for restoring symmetry to domain over which the central bank can vary its policy rate. They are: (1) abolishing currency (which would also be a useful crime-fighting measure); (2) paying...

Governments through the ages have appropriated real resources through the monopoly of the 'coinage'. In modern fiat money economies, the monopoly of the issue of legal tender is generally assigned to an agency of the state, the Central Bank, which may have varying degrees of operational and...

The paper considers ways of avoiding a liquidity trap and ways of getting out of one. Unless lower short nominal interest rates are associated with significantly lower interest volatility, a lower average rate of inflation, which will be associated with lower expected nominal interest rates,...

The paper establishes the following: First, money is neutral even if there is a non-zero stock of non-monetary nominal public debt, because the government adjusts real taxes to satisfy its intertemporal budget constraint. Second, Woodford's fiscal theory of the price level, according to which...

The paper analyzes the modalities and consequences of a breakdown of cooperation between the monetary authorities of inflation-prone Periphery Countries that use an exchange rate peg as an anti- inflationary device, when the Center is hit by an aggregate demand shock. Cooperation in the...

Twenty five years after the publication of the second edition, this paper describes and evaluates the Contributions to monetary and macroeconomics made in Don Patinkin's Money, Interest, and Prices (MIP). Its first accomplishment was to settle definitively many issues, such as the valid and...

It is often argued that the most important costs of inflation can be substantially mitigated by indexing reforms. Yet governments in moderate inflation countries have generally been very reluctant to promote institutional changes that would reduce the costs of inflation. Capital income continues...

This paper examines the case for rules rather than discretion in the conduct of monetary policy, from both historical and analytic perspectives. The paper starts with the rules of the game under the gold standard. These rules were ill-defined and not adhered to; active discretionary policy was...