These essays bring together a progression in monetary theory. The major theme that runs through all of the chapters is that in order to do monetary economics well in general equilibrium, it helps to have a good money demand underlying the theory.
A proper underlying money demand sets up arguably the best foundation from which to make extensions of monetary economics from the basic model. At the same time that money demand is modelled, this also “endogenizes” the velocity of money. This has been a challenge in the literature that these essays solve and then use to extend basic neoclassical growth and business cycle theory. Solving this problem, in a way that is a natural, direct, and “micro-founded” extension of the standard monetary theory is the first major contribution of the collection. The second major contribution is the extension of the neoclassical monetary models, using this solution, to reinvigorate classic issues of monetary economics and take them to the frontier.
Table of Contents
1. Overview Part I: Inflation and Welfare 2. The Welfare Costs of Inflation in a Cash in Advance Model with Costly Credit 3. A Comparison of Partial and General Equilibrium Estimates of the Welfare Cost of Inflation 4. The Optimality of a Zero Inflation Rate: Australia 5. On the Optimality of Restricting Credit: Inflation-Avoidance and Productivity 6. Ramsey-Friedman Optimality within a Banking Time Economy Part II: Money Demand and Velocity 7. The Demand for Bank Reserves and Other Monetary Aggregates 8. Money Velocity with Costly Credit 9. Money Demand in General Equilibrium Endogenous Growth: Estimating the Role of a Variable Interest Elasticity 10. Money Demand in an EU Accession Country: A VECM Study of Croatia Part III: Inflation and Growth 11. Inflation and Balanced-Path Growth with Alternative Payment Mechanisms 12. Contrasting Models of the Effect of Inflation on Growth 13. A Revised Tobin Effect from Inflation: Relative Input Price and Capital Ratio Realignments, US and UK, 1959-1999 14. Inflation and Growth: Explaining the Negative Effect 15. Granger Causality of the Inflation-Growth Mirror in Accession Countries Part IV: Monetary Business Cycles 16. On Keynes’s Theory of the Aggregate Price Level in the Treatise: Any Help for Modern Aggregate Analysis? 17. Credit Shocks in the Financial Deregulatory Era: Not the Usual Suspects 18. A Comparison of Exchange Economies within a Monetary Business Cycle 19. Money Velocity in an Endogenous Growth Business Cycle with Credit Shocks 20. Epilogue: The Perspective Going Forward
Max Gillman is Professor of Economics at Cardiff Business School, Cardiff.