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Woodford and Wicksell on Interest and Prices: The Place of the Pure Credit Economy in the Theory of Monetary Policy

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  • Laidler, David

Abstract

There can be no doubt that the monetary systems of a number of advanced countries nowadays resemble Knut Wicksell's (1898) model of the “pure credit economy” much more closely than did any that actually existed in the world for which he wrote. Currency has long been losing its quantitative importance in mediating transactions among the general public in such countries, and more recently, the development of modern information technology has made it possible for them to operate the clearing and settlement systems that underpin the use of bank deposits as means of exchange with a close-to-zero stock of reserve assets.

Suggested Citation

  • Laidler, David, 2006. "Woodford and Wicksell on Interest and Prices: The Place of the Pure Credit Economy in the Theory of Monetary Policy," Journal of the History of Economic Thought, Cambridge University Press, vol. 28(2), pages 151-159, June.
    • Handle: RePEc:cup:jhisec:v:28:y:2006:i:02:p:151-159_00
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    References listed on IDEAS

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    1. David Longworth, 2003. "Money in the Bank (of Canada)," Technical Reports 93, Bank of Canada.
    2. Laidler,David, 1999. "Fabricating the Keynesian Revolution," Cambridge Books, Cambridge University Press, number 9780521641739, September.
    3. Humphrey, Thomas M., 2003. "Knut Wicksell and Gustav Cassel on the Cumulative Process and the Price-Stabilizing Policy Rule," Journal of the History of Economic Thought, Cambridge University Press, vol. 25(2), pages 199-220, June.
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    Cited by:

    1. Ronny Mazzocchi, 2013. "Scope and Flaws of the New Neoclassical Synthesis," DEM Discussion Papers 2013/13, Department of Economics and Management.
    2. Nicolas Barbaroux, 2007. "Woodford and Wicksell: a Cashless Economy or a Moneyless Economy Framework ?," Post-Print ujm-00162418, HAL.
    3. Jo Michell, 2014. "Factors generating and transmitting the financial crisis; Functional distribution of income," Working papers wpaper41, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    4. Barbaroux, Nicolas, 2008. "The Wicksellian Flavour in Macroeconomics," Perfil de Coyuntura Económica, Universidad de Antioquia, CIE, August.
    5. Simmons, Richard & Dini, Paolo & Culkin, Nigel & Littera, Giuseppe, 2021. "Crisis and the role of money in the real and financial economies: an innovative approach to monetary stimulus," LSE Research Online Documents on Economics 110904, London School of Economics and Political Science, LSE Library.
    6. Alejandro Rodríguez Arana, 2012. "Is it Possible to Go Back to Ad Hoc Macroeconomic Models? The Case of the Romer-Taylor Model," Working Papers 0312, Universidad Iberoamericana, Department of Economics.
    7. Roberto Tamborini, 2006. "Back to Wicksell? In search of the foundations of practical monetary policy," Department of Economics Working Papers 0602, Department of Economics, University of Trento, Italia.
    8. Pedro Garcia Duarte & Gilberto Tadeu Lima, 2012. "Microfoundations Reconsidered," Books, Edward Elgar Publishing, number 14869.
    9. Claudio Borio & Piti Disyatat, 2011. "Global imbalances and the financial crisis: Link or no link?," BIS Working Papers 346, Bank for International Settlements.
    10. Richard Simmons & Paolo Dini & Nigel Culkin & Giuseppe Littera, 2021. "Crisis and the Role of Money in the Real and Financial Economies—An Innovative Approach to Monetary Stimulus," JRFM, MDPI, vol. 14(3), pages 1-28, March.
    11. Pedro Garcia Duarte, 2012. "Not Going Away? Microfoundations in the Making of a New Consensus in Macroeconomics," Chapters, in: Microfoundations Reconsidered, chapter 6, Edward Elgar Publishing.
    12. Ronny Mazzocchi, 2013. "Investment-Saving Imbalances with Endogenous Capital Stock," DEM Discussion Papers 2013/14, Department of Economics and Management.
    13. Ronny Mazzocchi & Roberto Tamborini & Hans-Michael Trautwein, 2009. "The Two Triangles: what did Wicksell and Keynes know about macroeconomics that modern economists do not (consider)?," Department of Economics Working Papers 0906, Department of Economics, University of Trento, Italia.
    14. Jonung, Lars, 2022. "The Problems of Inflation Targeting Originate in the Monetary Theory of Knut Wicksell," Working Papers 2022:8, Lund University, Department of Economics.
    15. Correa Romar, 2015. "The Coordination Problem in the Stockholm School," Journal of Heterodox Economics, Sciendo, vol. 2(2), pages 138-150, December.
    16. Yuli Radev, 2015. "New dynamic disequilibrium," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 65-90.
    17. Alexander Tobon & Nicolas Barbaroux, 2015. "Credit and Prices in Woodford's New Neoclassical Synthesis," Economic Thought, World Economics Association, vol. 4(1), pages 21-46, March.
    18. Yuli Radev, 2016. "Dynamic disequilibrium and investment - saving imbalance," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 126-149.

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    More about this item

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics

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