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New Monetarist Economics: Methods

Staff Report 442 | Published April 1, 2010

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New Monetarist Economics: Methods


This essay articulates the principles and practices of New Monetarism, our label for a recent body of work on money, banking, payments, and asset markets. We first discuss methodological issues distinguishing our 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. We describe the principles of these schools and contrast them with our approach. To show how it works, in practice, we build a benchmark New Monetarist model, and use it to study several issues, including the cost of inflation, liquidity and asset trading. We also develop a new model of banking.

Published in: _Federal Reserve Bank of St. Louis Review_ (Vol. 92, No. 4, July-August 2010, pp. 265-302)