Monetary Theory and Policy, fourth edition / Edition 4

by Carl E. Walsh

Overview

The 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. Other new material includes discussions of price adjustment, labor market frictions and unemployment, and moral hazard frictions among financial intermediaries. References and end-of-chapter problems allow readers to extend their knowledge of the topics covered.

Monetary Theory and Policy continues to be the most comprehensive and up-to-date treatment of monetary economics, not only the leading text in the field but also the standard reference for academics and central bank researchers.

Product Details

ISBN-13:	9780262035811
Publisher:	MIT Press
Publication date:	05/12/2017
Series:	The MIT Press
Edition description:	fourth edition
Pages:	688
Product dimensions:	7.20(w) x 9.10(h) x 1.20(d)
Age Range:	18 Years

About the Author

Carl E. Walsh is Professor of Economics at the University of California, Santa Cruz. He is a Visiting Scholar at the Federal Reserve Bank of San Francisco.

Table of Contents

Preface
Notation
Introduction
1 Empirical Evidence on Money and Output
1.1 Introduction
1.2 Some Basic Correlations
1.3 Estimating the Effect of Money on Output
1.4 Summary
2 Money in a General Equilibrium Framework
2.1 Introduction
2.2 The Tobin Effect
2.3 Money in the Utility Function
2.4 Summary
2.5 AppendiX: The MIU ApproXimation
2.6 Problems
3 Money and Transactions
3.1 Introduction
3.2 ShoppingTime Models
3.3 CashinAdvance Models
3.4 Other Approaches
3.5 Summary
3.6 AppendiX: The CIA ApproXimation
3.7 Problems
4 Money and Public Finance
4.1 Introduction
4.2 Budget Accounting
4.3 Equilibrium Seigniorage
4.4 Optimal TaXation and Seigniorage
4.5 Friedman's Rule Revisited
4.6 NonindeXed TaX Systems
4.7 Problems
5 Money and Output in the Short Run
5.1 Introduction
5.2 FleXible Prices
5.3 Sticky Prices and Wages
5.4 A Framework for Monetary Analysis
5.5 Inflation Persistence
5.6 Summary
5.7 AppendiX
5.8 Problems
6 Money and the Open Economy
6.1 Introduction
6.2 The ObstfeldRogoff TwoCountry Model
6.3 Policy Coordination
6.4 The Small Open Economy
6.5 Summary
6.6 AppendiX
6.7 Problems
7 The Credit Channel of Monetary Policy
7.1 Introduction
7.2 Imperfect Information in Credit Markets
7.3 Macroeconomic Implications
7.4 Does Credit Matter?
7.5 Summary
8 Discretionary Policy and Time Inconsistency
8.1 Introduction
8.2 Inflation under Discretionary Policy
8.3 Solutions to the Inflation Bias
8.4 Is the Inflation Bias Important?
8.5 Do Central Banking Institutions Matter?
8.6 Lessons and Conclusions
8.7 Problems
9MonetaryPolicy Operating Procedures
9.1 Introduction
9.2 From Instruments to Goals
9.3 The InstrumentChoice Problem
9.4 Operating Procedures and Policy Measures
9.5 Problems
10 Interest Rates and Monetary Policy
10.1 Introduction
10.2 InterestRate Rules and the Price Level
10.3 Interest Rate Policies in General Equilibrium Models
10.4 The Term Structure of Interest Rates
10.5 A Model for Policy Analysis
10.6 Summary
10.7 Problems
References
Author IndeX
Subject IndeX

What People are Saying About This

Peter Ireland

Students will find, in Walsh's text, a clear, comprehensive survey of all major developments in monetary economics, extending back three decades and running through the present. Experienced researchers, meanwhile, can easily focus on selected chapters, covering topics of special interest.

Yuriy Gorodnichenko

Carl Walsh's book is the single most important reference for anybody interested in monetary economics. The book does a splendid job of covering key theoretical models and linking them to empirics that make the exposition relevant and engaging. I recommend this book most strongly.

Marvin Goodfriend

"Karl Walsh's Monetary Theory and Policy is an indispensable bridge between theory and practice. The book is a comprehensive overview of the field. Each topic is addressed by a few models exposited with mathematical rigor and policy insight. The depth and breadth of the model presentations make the book an essential reference for students and central bank economists alike."--Marvin Goodfriend,
Tepper School of Business, Carnegie Mellon University

Andrew Levin

The latest edition of Carl Walsh's textbook is an invaluable resource for understanding the remarkably rapid evolution of monetary policy over the past decade, as major central banks have deployed new strategies, tools, and operating procedures to mitigate the effective lower bound and to facilitate the smooth withdrawal of extraordinary monetary stimulus.

Marvin Goodfriend

Carl Walsh's Monetary Theory and Policy is an indispensable bridge between theory and practice. The book is a comprehensive overview of the field. Each topic is addressed by a few models exposited with mathematical rigor and policy insight. The depth and breadth of the model presentations make the book an essential reference for students and central bank economists alike.

Endorsement

This third edition of Walsh's by-now classic on monetary economics represents a major revision and expansion of the previous edition, incorporating new developments in theory, modeling practice, and policy insights. This book is a pleasure to read and study with, thanks to the right balance of insight, rigor, and accessibility. It stands worldwide as the frontier reference text for academic and central bank researchers in monetary theory and policy. It is also a must-read for advanced undergraduate and graduate macroeconomics courses, skillfully combining theory with numerical simulations, policy insights, problem sets, and complementary simulation programs provided on the web.

—Klaus Schmidt-Hebbel, Chief of Economic Research, Central Bank of ChileKlaus Schmidt-Hebbel

From the Publisher

Students will find, in Walsh's text, a clear, comprehensive survey of all major developments in monetary economics, extending back three decades and running through the present. Experienced researchers, meanwhile, can easily focus on selected chapters, covering topics of special interest.

—Peter Ireland, Professor of Economics, Boston College

This book is an invaluable and unique resource on the theory and practice of monetary economics. Its insightful and comprehensive coverage—including of the extraordinary actions taken by central banks after the global financial crisis—will serve as an excellent guide to students, researchers, and practitioners.

—Glenn D. Rudebusch, Senior Policy Advisor, Federal Reserve Bank of San Francisco; coauthor of Yield Curve Modeling and Forecasting

Carl Walsh's book is the single most important reference for anybody interested in monetary economics. The book does a splendid job of covering key theoretical models and linking them to empirics that make the exposition relevant and engaging. I recommend this book most strongly.

—Yuriy Gorodnichenko, Associate Professor of Economics, University of California, Berkeley

The latest edition of Carl Walsh's textbook is an invaluable resource for understanding the remarkably rapid evolution of monetary policy over the past decade, as major central banks have deployed new strategies, tools, and operating procedures to mitigate the effective lower bound and to facilitate the smooth withdrawal of extraordinary monetary stimulus.

—Andrew Levin, Professor of Economics, Dartmouth College

Glenn D. Rudebusch

This book is an invaluable and unique resource on the theory and practice of monetary economics. Its insightful and comprehensive coverage—including of the extraordinary actions taken by central banks after the global financial crisis—will serve as an excellent guide to students, researchers, and practitioners.

Klaus Schmidt-Hebbel

This third edition of Walsh's by-now classic on monetary economics represents a major revision and expansion of the previous edition, incorporating new developments in theory, modeling practice, and policy insights. This book is a pleasure to read and study with, thanks to the right balance of insight, rigor, and accessibility. It stands worldwide as the frontier reference text for academic and central bank researchers in monetary theory and policy. It is also a must-read for advanced undergraduate and graduate macroeconomics courses, skillfully combining theory with numerical simulations, policy insights, problem sets, and complementary simulation programs provided on the web.