The prevailing view among economists and policy makers is that money has no impact on production in a longer term characterised by full price and wage flexibility and rational expectations. This book presents a revisionist view of monetary policy and monetary regimes. It presents several new mechanisms, indicating that money affects long-term production. The consequent policy implications are also discussed, including: the uses of monetary policy and monetary regimes in achieving macroeconomic goals; the impact of an independent central bank; the effects of a movement from floating exchange rates to fixed exchange rates in a monetary union. In addition to the theoretical and policy discussions the book also contains a comprehensive survey of the current state of scholarship in this area. Designed as a textbook for advanced undergraduate and graduate students in macroeconomics, labour economics and finance, this book will also appeal to scholars and policy-makers.
• A major new upper level textbook with global adoption potential in finance, labour economics, macroeconomics and applied economics • A major study presenting important, original, and accessible research on a subject of immense topicality and international appeal • The latest book in Cambridge's successful list in monetary economics
Part I. Introduction and Main Assumptions: 1. Introduction; 2. The wage formation process; 3. The literature; Part II. The Impact of Monetary Policy and Inflation: 4. Imperfect integration of securities markets; 5. Monopolistic competition in bank markets; 6. Utility from securities holdings; 7. Hysteresis effects from monetary policy; 8. The impact of inflation on bank earnings; Part III. The Impact of Monetary Regimes: 9. Centralised wage formation; 10. Fiscal policy; 11. Price stability goal; 12. Uncertainty concerning policy formation; 13. Policy uncertainty in a fixed-but-adjustable exchange rate regime; 14. The impact of uncertainty on wage-setting; Part IV. Policy Implications: 15. Policy implications of monetary non-neutrality; 16. A microeconomic foundation.