The paper shows that the "monetary policy rules and inflation targeting" literature and the "endogenous money" literature share a reaction function approach to central banking policy. Monetary aggregates are the outcome of the price-maker and quantity-taker behavior of central banks in the...

A central tenet of the so-called new consensus view in macroeconomics is that there is no long-run trade-off between inflation and unemployment. The main policy implication of this principle is that all monetary policy can aim for is (modest) short-run output stabilization and long-run price...

This paper discusses the current 'new consensus' view on monetary policy and the theoretical framework on which that practical view relies, namely, the 'targets-and-instrument approach'. We argue that in the modern world of financial innovation and liability management central banks cannot...

We provide a formal definition of the “liquidity trap” (LT) according to which, a LT arises if a combination of high precautionary saving, low investment and stringent conditions for access to bank credit stemming from a high degree of liquidity preference make the sum of the “neutral”...