Dealing with uncertainty is the daily bread of central bankers and has been a central theme for the ECB since its inception. Central banks like other economic operators are continuously confronted with conflicting data as well as competing and evolving interpretations of the working of the...

The M2 monetary aggregate is monitored by the Federal Reserve, using a broad brush theoretical analysis and an informal empirical analysis. This paper illustrates empirical identification of an eleven-variable system, in which M2 and the factors that the Fed regards as causes and effects are...

Does Friedman’s k-percent rule guarantee a unique equilibrium outcome? We show analytically the answer to this question is sensitive to the method of aggregation. Focusing on broad measures of money, we show that fixing the growth rate of the true monetary aggregate will generate a unique...

This paper analyzes optimal monetary policy in a standard New-Keynesian model augmented with a financial sector. The banks in the model are subject to shocks which impede their ability and willingness to produce financial assets. We show these financial market supply shocks decrease both the...

In response to the recent financial crisis, central banks around the world, including the Bank of Canada, have provided markets with extraordinary levels of liquidity. As the economic recovery takes hold, the question arises of what the increased liquidity, through higher money growth, portends...

The relationship between money and output in the euro area is tested in the context of a two-equation model. An interesting aspect of the empirical analysis is the evidence that the real M3 has a correctly signed and statistically significant impact on business cycle fluctuations, given the real...

New Estimates of U.S. Currency Abroad, the Domestic Money Supply and the Unreported Economy Edgar L. Feige * Abstract Despite financial innovations that have created important new substitutes for cash usage, per capita holdings of U.S. currency amount to $2950. Yet American households and...

This paper views the policy response to the recent financial crisis from the perspective of Milton Friedman's monetary economics. Five major aspects of the policy response were: 1) discount window lending was provided broadly to the financial system, at rates that were low in relation to the...

The relationships among the quantity theory of money, monetarism and policy regimes based on money-growth and inflation targeting are briefly discussed as a prelude to an exposition of alternative views of money’s role in the transmission mechanism of monetary policy. The passive-money view...

In order to analyze current state of events in the world economy, parallel analysis with the country that has gone through boom cycle in real estate and financial asset prices (as US did during the last decade) and sudden consequential bust in mid 70s and late 80s (USA 2007), namely Japan, is...