Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/189380
Authors: 
Woodford, Michael
Year of Publication: 
2006
Series/Report no.: 
Queen's Economics Department Working Paper 1104
Abstract: 
This paper was presented as the 2006 W.A. Mackintosh Lecture at Queen's University. I consider some of the leading arguments for assigning an important role to tracking the growth of monetary aggregates when making decisions about monetary policy. First, I consider whether ignoring money means returning to the conceptual framework that allowed the high inflation of the 1970s. Second, I consider whether models of inflation determination with no role for money are incomplete, or inconsistent with elementary economic principles. Third, I consider the implications for monetary policy strategy of the empirical evidence for a long-run relationship between money growth and inflation. (Here I give particular attention to the implications of "two-pillar Phillips curves" of the kind proposed by Gerlach (2003).) And fourth, I consider reasons why a monetary policy strategy based solely on short-run inflation forecasts derived from a Phillips curve may not be a reliable way of controlling inflation. I argue that none of these considerations provide a compelling reason to assign a prominent role to monetary aggregates in the conduct of monetary policy.
Subjects: 
inflation
Phillips curve
monetary policy
JEL: 
E50
E52
E58
Document Type: 
Working Paper
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