The recent literature on monetary policy in the presence of a zero lower bound on interest rates has shown that forward guidance regarding the path of interest rates can be very effective in preserving macroeconomic stability in the face of a contractionary demand shock; moreover, that...

The ‘new open-economy macroeconomics’ seeks to provide an improved basis for monetary and exchange-rate policy through the construction of open-economy models that feature rational expectations, optimizing agents, and slowly adjusting prices of goods. This Paper promotes an alternative...

In this Paper, we present a dynamic optimizing model that allows explicitly for imperfect substitutability between different financial assets. This is specified in a manner that captures Tobin’s (1969) view that an expansion of one asset’s supply affects both the yield on that asset and the...

This Paper examines some recent monetary policy debates, in light of commentary on those issues contained in some of the work of Milton Friedman. The specific aspect of Friedman’s work considered here is the commentary on monetary policy in his Newsweek magazine columns from 1966 to 1984. My...

In this Paper, we look at the role of money in a general framework that encompasses three competing environments: the New Keynesian model with separable utility and static money demand; the non-separable utility variant with habit formation; and the New Keynesian model modified to allow for...

Understanding the degree of measurement error in the estimates of the output gap available to policymakers in ‘real time’ is important both for the formulation of monetary policy and for the study of inflation behaviour. For the United Kingdom, no official output gap series was published for...

This Paper provides a discussion of some aspects of aggregate supply and demand determination in the United Kingdom. It argues that: (1) UK policymakers in the 1960s and 1970s did not use the downward-sloping Phillips curve as a model of inflation or a guide to policy. The explanation proposed...

This Paper considers the role of monetary aggregates in modern macroeconomic models of the New Keynesian type. The focus is on possible developments of these models that are suggested by the monetarist literature, and that in addition seem justified empirically. Both the relation between money...

We provide empirical estimates of the effect of large-scale asset purchase (LSAP)-style operations on longer-term U.S. Treasury yields within a framework that nests the alternative theoretical perspectives on LSAPs. As the principal channels through which LSAPs migh tmatter for longer-term...

The United Kingdom is a highly open economy, and has a monetary policy strategy of targeting inflation in consumer prices. In this Paper, we look at the evidence from the UK on inflation behaviour, and examine the propositions from several theoretical models about inflation dynamics in an open...