There used to be a debate over interest rate control vs. base control of monetary policy. We always knew (at least some of us always knew) that interest rate control couldn't work in theory, but it seemed to work in practice, so eventually even the die-hard defenders of base control quietened down, or were ignored, […]

"Deficiencies of aggregate demand are always and everywhere a monetary phenomenon". There's an excess supply of newly-produced goods, and an excess demand for money. But what exactly does an excess demand for money mean? And what does it mean for the effectiveness of monetary policy?

The Bank of England has switched to quantitative easing. It is buying long bonds (gilts). What would count as a signal of success? We could argue that falling yields would signal success, because it is trying to reduce long interest rates to stimulate investment. But we could equally argue that rising yields would signal success, […]

A permanent increase in the money supply (or one that is expected to be permanent) will have a different, and bigger, effect today than a temporary increase in the money supply (or one that is expected to be temporary). To say the same thing a different way, an increase in the expected future money supply […]

I will sketch a simple model in which the distribution of wealth gets more unequal over time, how the equilibrium real interest rate falls over time, eventually leading to a zero nominal interest rate, and unemployment. I will then show that an increase in the money supply can increase employment, despite zero nominal interest rates.