Do Frictionless Models of Money and the Price Level Make Sense?

No. As well-specified Walrasian general equilibrium systems, frictionless models are isomorphic with the Arrow-Debreu (A-D) world. It is well known that the A-D world has no role for money, credit or banks. Grafting a role for money onto a frictionless model by appending a quantity equation or cash-in-advance constraint makes the error of converting money into a friction. Furthermore, as frictionless models have no use for money or nominal values it makes no sense to use them to adjudicate between theories of the price level or to claim that they provide the theoretical foundations for monetary policy.frictionless models; `monetary frictions'; nominal and numeraire prices; theories of the price level

Keynes, Keynesians and Contemporary Monetary Theory and Policy: An Assessment

There has been no Keynesian Revolution in economic theory but there has been an unacknowledged Keynes's Revolution in economic policy. Keynes's theoretical revolution rested on the adoption of monetary analysis and the application of the principle of effective demand to demonstrate the existence of multiple long-period equilibria. Keynes's policies - creating a role for `Big Government' and the `Big Bank' - follow from his theory and have changed the structure of the laissez faire economy. Many Keynesians fail to acknowledge either of these issues and continue the classical tradition of real analysis and the assumption of unique long-period equilibrium. Real analysis, as a special case of Keynes's monetary analysis, provides a distorted perspective of the responsibilities of monetary policy which largely accounts for the increasing fragility and volatility exhibited by financial markets over the past two decades.

Doing Without Money: A critical assessment of Woodford's analysis.

Woodford employs an inter-temporal general equilibrium model to examine the properties of the monetary system as it evolves form the use of a physical medium of exchange to an electronic medium. He presents a structure in which cash as a means of payment can be made to vanish at the limit but where he claims the price level remains determinate. It is shown that Woodford's analysis involves fundamental but still widespread conceptual and methodological errors. His general equilibrium model does not map into the world of electronic money and his analysis has no implications for the art of central banking.Electronic money, Cashless limit, Hahn property, Accounting systems of exchange

Doing Without Money: A Critical Assessment of Woodford's Analysis

Woodford employs an inter-temporal general equilibrium model to examine the properties of the monetary system as it evolves form the use of a physical medium of exchange to an electronic medium. He presents a structure in which cash as a means of payment can be made to vanish at the limit but where he claims the price level remains determinate. It is shown that Woodford's analysis involves fundamental but still widespread conceptual and methodological errors. His general equilibrium model does not map into the world of electronic money and his analysis has no implications for the art of central banking.electronic money, cashless limit, Hahn property, accounting systems of exchange

Money as Friction: Conceptual Dissonance in Woodford's Interest and Prices

In Interest and Prices Woodford employs a frictionless model to derive nominal interest rate rules that can be applied by central banks to achieve price level stability. But frictionless models are Walrasian general equilibrium models that preclude any role for money. Furthermore frictionless model have no role for nominal values or the price level and therefore no role for a central bank. Consequently, conceptual anomalies arise in Woodford's attempt to analyse questions of monetary theory and policy that are precluded by construction in frictionless models. In some states of the model money is converted into a 'friction', contra economic theory.frictionless models; time-0 auction; 'monetary frictions'

Doing Without Money: A Critical Assessment of Woodford's Analysis of Monetary Policy in a Post-monetary World

Woodford (1997, 1998) employs an inter-temporal general equilibrium model to examine the properties of the monetary system as it evolves form the use of a physical medium of exchange to an electronic medium. He presents a structure in which cash (money) as a means of payment can be made to vanish at the limit but where he claims the price level remains determinate. It is shown that Woodford's analysis involves fundamental but still widespread conceptual and methodological errors. His general equilibrium model does not map into the world of electronic money and his analysis has no implications for the art of central banking.electronic money, Walrasian general equilibrium

Central Bank Interest-Rate Control in a Cashless, Arrow-Debreu Economy: A Comment on Wallace

Wallace attempts to analyse central bank interest rate control in a cashless, Arrow-Debreu economy. The model incorporates only the unit of account function of money and exhibits a version of the classical dichotomy in which arbitrary accounting prices are independent of the equilibrium real relative price vector. A model with these properties is incapable of providing a theory of the price level or inflation, nominal interest rate rules or justifying a role for the central bank. Nominal magnitudes are nominal in name only and Wallace's analysis is without theoretical foundations. It generates a series of conceptual and logical puzzles.cashless; Arrow-Debreu economy; accounting prices

A 2+1-Dimensional Non-Isothermal Magnetogasdynamic System. Hamiltonian-Ermakov Integrable Reduction

A 2+1-dimensional anisentropic magnetogasdynamic system with a polytropic gas law is shown to admit an integrable elliptic vortex reduction when $\gamma=2$ to a nonlinear dynamical subsystem with underlying integrable Hamiltonian-Ermakov structure. Exact solutions of the magnetogasdynamic system are thereby obtained which describe a rotating elliptic plasma cylinder. The semi-axes of the elliptical cross-section, remarkably, satisfy a Ermakov-Ray-Reid system