Money and the Natural Rate of Unemployment

This upper level textbook for students in finance, labour economics and macroeconomics challenges the conventional view that money has no impact on production in the longer term. The resulting policy implications are also considered, in particular the desirability of an independent central bank.

The prevailing view among economists and policy makers is that money has no impact on production in a longer term characterised by full price and wage flexibility and rational expectations. This book presents a revisionist view of monetary policy and monetary regimes. It presents several new mechanisms, indicating that money affects long-term production. The consequent policy implications are also discussed, including: the uses of monetary policy and monetary regimes in achieving macroeconomic goals; the impact of an independent central bank; the effects of a movement from floating exchange rates to fixed exchange rates in a monetary union. In addition to the theoretical and policy discussions the book also contains a comprehensive survey of the current state of scholarship in this area. Designed as a textbook for advanced undergraduate and graduate students in macroeconomics, labour economics and finance, this book will also appeal to scholars and policy-makers.