Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203070 
Year of Publication: 
2018
Series/Report no.: 
LEM Working Paper Series No. 2018/17
Publisher: 
Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM), Pisa
Abstract: 
We revisit the main building blocks of the theoretical models underlying the monetary policy consensus before the Great Recession. We highlight how the failure of these models to prevent the crisis and to provide guidance during the recession were due to the excessive confidence in the ability of markets to coordinate demand and supply, and to the neglect of the role of finance. Furthermore, we outline the main elements of an alternative approach to monetary policy that put emphasis on the processes driving coordination in markets, and on the externalities transmitted by financial inter-linkages. Many elements of this new approach are captured by new classes of models, namely, agent-based and financial network models. We discuss some insights from these models for the conduct of monetary policy, and for its interactions with fiscal and macro- prudential policies.
Subjects: 
R&D
output-inflation dynamics
new-keynesian models
disequilibrium analysis
agent-based models
fiscal-monetary policy interactions
quantitative easing policies
JEL: 
E31
E32
E5
E61
E62
Document Type: 
Working Paper

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