New Monetarist Economics: Models

By Stephen Williamson and Randall Wright

The purpose of this paper is to discuss some of the models used in New Monetarist Economics, which is our label for a body of recent work on money, banking, payments systems, asset markets, and related topics. A key principle in New Monetarism is that solid microfoundations are critical for understanding monetary issues. We survey recent papers on monetary theory, showing how they build on common foundations. We then lay out a tractable benchmark version of the model that allows us to address a variety of issues. We use it to analyze some classic economic topics, like the welfare effects of inflation, the relationship between money and capital accumulation, and the Phillips curve. We also extend the benchmark model in new ways, and show how it can be used to generate new insights in the study of payments, banking, and asset markets.

This is a companion paper (with 100+ pages) to a chapter to appear in the Handbook of Monetary Economics. It summarizes the principles of the money search agenda, now named New Monetarist Economics, and offers a succession of models, like when you would cover the topic in a graduate class. Bookmark this page to refer to it…

3 Responses to New Monetarist Economics: Models

  1. M.H. says:

    I am an outsider to this money search literature, and I will certainly not read 100 pages on it. My impression was that this literature was or still is far removed from any concrete policy relevance. Please correct me if I am wrong.

  2. Steve Williamson says:

    You don’t have to read the whole 100 pages. This is a chapter for the Handbook of Monetary Economics, and is intended partly as a survey. Look through some of the examples. I can understand the impression you have from the earlier literature, but the whole idea of this and its companion paper, “New Monetarist Economics: Methods,” is to show that we’re very much relevant. See also

    Steve Williamson

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