NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Small Corner of Intertemporal Public Finance - New Developments in Monetary Economics: 2 Ghosts, 2 Eccentricities, A Fallacy, A Mirage and A Mythos

Willem Buiter

NBER Working Paper No. 10524
Issued in May 2004
NBER Program(s):   EFG   ME   PE

Monetary theory and policy are part of intertemporal public finance. The lecture reviews some interesting recent developments. The two ghosts are the venerable liquidity trap and the Pigou effect or real balance effect. The eccentricities are negative nominal interest rates and the helicopter drop of base money - two unconventional policies for stimulating consumer demand even when nominal interest rates, short and long, present and future, are at their zero lower bounds. The fallacy is the so-called Fiscal Theory of the Price Level, a logically in-consistent theory of the link between the government budget and the general price level. The mirage is the prediction that financial deregulation and technical change in the payments and settlements technology (e-money etc.), will cause monetary policy to lose its capacity to influence even nominal economic variables. Mythos refers to the independent central bank.

download in pdf format
   (343 K)

email paper

This paper is available as PDF (343 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10524

Published: Buiter, Willem H. "New Developments In Monetary Economics: Two Ghosts, Two Eccentricities, A Fallacy, A Mirage And A Mythos," Economic Journal, 2005, v115(502,Mar), 1-31.

Users who downloaded this paper also downloaded these:
AntrĂ s and Foley w17091 Poultry in Motion: A Study of International Trade Finance Practices
Fischer and Merton w1291 Macroeconomics and Finance: The Role of the Stock Market
Yitzhaki w8062 A Public Finance Approach to Assessing Poverty Alleviation
Mulligan and Philipson w7698 Merit Motives and Government Intervention: Public Finance in Reverse
Sinn and Wollmershaeuser w17626 Target Loans, Current Account Balances and Capital Flows: The ECB's Rescue Facility
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us