Monetary theory and policy book
Monetary Theory DefinitionThe new edition of a comprehensive treatment of monetary economics, including the first extensive coverage of the effective lower bound on nominal interest rates. This textbook presents a comprehensive treatment of the most important topics in monetary economics, focusing on the primary models monetary economists have employed to address topics in theory and policy. Striking a balance of insight, accessibility, and rigor, the book covers the basic theoretical approaches, shows how to do simulation work with the models, and discusses the full range of frictions that economists have studied to understand the impacts of monetary policy. For the fourth edition, every chapter has been revised to improve the exposition and to reflect recent research. The new edition offers an entirely new chapter on the effective lower bound on nominal interest rates, forward guidance policies, and quantitative and credit easing policies. Material on the basic new Keynesian model has been reorganized into a single chapter to provide a comprehensive analysis of the model and its policy implications. In addition, the chapter on the open economy now reflects the dominance of the new Keynesian approach.
Monetary Theory and Policy, Fourth Edition
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It argues that central banks , which control the levers of monetary policy , can exert much power over economic growth rates by tinkering with the amount of currency and other liquid instruments circulating in a country's economy. According to monetary theory, if a nation's supply of money increases, economic activity will rise, too, and vice versa. M represents the money supply, V is the velocity number of times per year the average dollar is spent , P is the price of goods and services, and Q is the number of goods and services. When there is slack in the economy, Q will increase at a faster rate than P under monetary theory. In many developing economies, monetary theory is controlled by the central government, which may also be conducting most of the monetary policy decisions. In the U. The FRB operates on a monetary theory that focuses on maintaining stable prices low inflation , promoting full employment, and achieving steady growth in gross domestic product GDP.