The 'New Consensus' View of Monetary Policy: A New Wicksellian Connection?

The Levy Economics Institute Working Paper No. 476

24 Pages Posted: 1 Nov 2006

See all articles by Giuseppe Fontana

Giuseppe Fontana

Leeds University Business School (LUBS); Leeds University Business School (LUBS) - Division of Economics

Date Written: October 2006

Abstract

One of the greatest achievements of the modern "New Consensus" view in macroeconomics is the assertion of a nonquantity theoretic approach to monetary policy. Leading theorists and practitioners of this view have indeed rejected the quantity theory of money, and defended a return to the old Wicksellian idea of eliminating high levels of inflation by adjusting nominal interest rates to changes in the price level. This paper evaluates these recent developments in the theory and practice of monetary policy in terms of two basic questions: 1) What is the monetary policy instrument controlled by the central bank? and 2) Which macroeconomic variables are affected in the short and long run by monetary policy?

Keywords: Wicksell, monetary policy, New Consensus, endogenous Money

JEL Classification: E5, E52

Suggested Citation

Fontana, Giuseppe, The 'New Consensus' View of Monetary Policy: A New Wicksellian Connection? (October 2006). The Levy Economics Institute Working Paper No. 476, Available at SSRN: https://ssrn.com/abstract=941177 or http://dx.doi.org/10.2139/ssrn.941177

Giuseppe Fontana (Contact Author)

Leeds University Business School (LUBS) ( email )

Leeds, LS2 9JT
United Kingdom

Leeds University Business School (LUBS) - Division of Economics ( email )

Leeds LS2 9JT
United Kingdom

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