The European Central Bank has assigned a special role to money in its two pillar strategy and has received much … criticism for this decision. In this paper, we explore possible justifications. The case against including money in the central … contributions to research on monetary policy in the last two decades. Of course, if one allows for a direct effect of money on …

criticized for failing to explain common trends in money growth and inflation, and that therefore money should be used as a cross … the possibility of persistent central bank misperceptions. Such misperceptions motivate the search for policies that …

The European Central Bank has assigned a special role to money in its two pillar strategy and has received much … criticism for this decision. The case against including money in the central bank's interest rate rule is based on a standard … decades. In this paper, we develop a justification for including money in the interest rate rule by allowing for imperfect …

amount of assets. The implication is that, instead of studying money demand using time series and looking at historical … can use this methodology to estimate the interest elasticity of money demand at interest rates close to zero. We find that …: (a) the elasticity of money demand is very small when the interest rate is small; (b) the probability that a household …

modified to account for observed money growth and inflation trends, and that monetary trends may serve as a useful cross … persistent errors in monetary policy and sustained trends in money growth and inflation. If interest rate prescriptions derived … from Keynesian-style models are augmented with a cross-check against money-based estimates of trend inflation, inflation …

reduced form relationships involving money and interest rates. Geweke linear feedback measures are presented for a subset of … relationships involving money than expected, while interest rate leads, though significant, are often at long lags. In addition …, aggregate ERM money demand functions are shown to be stable. These results, though not conclusive, provide support for the case …

This paper investigates whether the quantity theory of money is still alive. We demonstrate three insights. First, for … countries with low inflation, the raw relationship between average inflation and the growth rate of money is tenuous at best …. Second, the fit markedly improves, when correcting for variation in output growth and the opportunity cost of money, using …

, for the Fed at over $7 trillion. This is tax payers' money that is not under the effective control of the fiscal …

's rule: short run increases in the money stock - whether through issuing spending coupons, open market operations or foreign … exchange intervention - change nothing as long as the money stock shrinks in the long run. Second, two simple ‘Keynesian …