Monetary Theory and Policy

The new edition of a comprehensive textbook on monetary economics includes an in-depth treatment of the effective lower bound for nominal interest rates.

This textbook provides a thorough examination of the key topics in monetary economics, focusing on the primary models that economists have used to address theoretical and policy questions. It successfully balances insight, accessibility, and rigor; the book covers fundamental theoretical approaches, demonstrates how to conduct simulations with the models, and discusses the full range of frictions that economists have studied to understand the effects of monetary policy.

For the fourth edition, each chapter has been revised to enhance clarity and reflect current research findings. The new edition features an entirely new chapter on the effective lower bound for nominal interest rates, forward guidance policies, as well as quantitative and credit policy measures. The material on the basic New Keynesian model has been restructured into a single chapter to provide a comprehensive analysis of the model and its policy implications. Additionally, the chapter on open economies now reflects the dominance of the New Keynesian approach. Other new content includes discussions on price adjustments, labor market frictions and unemployment, as well as moral hazard frictions in financial intermediaries. References and exercises at the end of the chapters allow readers to deepen their understanding of the topics covered.

Monetary Theory and Policy remains the most comprehensive and up-to-date work on monetary economics, serving both as a leading textbook in the field and as a standard reference for academics and researchers at central banks.