New monetarist economics: methods

Abstract

This essay articulates the principles and practices of New Monetarism, the authors' label for a recent body of work on money, banking, payments, and asset markets. They first discuss methodological issues distinguishing their approach from others: New Monetarism has something in common with Old Monetarism, but there are also important differences; it has little in common with Keynesianism. They describe the principles of these schools and contrast them with their approach. To show how it works in practice, they build a benchmark New Monetarist model and use it to study several issues, including the cost of inflation, liquidity, and asset trading. They also develop a new model of banking.Monetary policy