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Central bank behaviour and the stability of macroeconomic equilibrium: a critical examination of the 'New Consensus'

In: The New Monetary Policy

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  • Mark Setterfield

Abstract

Beginning with an assessment of new thinking in macroeconomics and monetary theory, this book suggests that many countries have adopted the New Consensus Monetary Policy since the early 1990s in an attempt to reduce inflation to low levels. It goes on to illustrate that the explicit control of the money supply, which was fashionable in the 1970s and 1980s in the UK, US, Europe and elsewhere, was abandoned in favour of monetary rules that focus on interest rate manipulation by the central bank. The objective of these rules is to achieve specific, or a range of, inflation targets.

Suggested Citation

  • Mark Setterfield, 2005. "Central bank behaviour and the stability of macroeconomic equilibrium: a critical examination of the 'New Consensus'," Chapters, in: Phillip Arestis & Michelle Baddeley & John S.L. McCombie (ed.), The New Monetary Policy, chapter 3, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:3536_3
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    Cited by:

    1. Peter Docherty, 2009. "Re‐Examining The Implications Of The New Consensus: Endogenous Money And Taylor Rules In A Simple Neoclassical Macro Model," Metroeconomica, Wiley Blackwell, vol. 60(3), pages 495-524, July.
    2. Modenesi, Rui Lyrio & Modenesi, André de Melo & Martins, Norberto Montani & Fontaine, Patrick, 2015. "Restructuring the Economic Policy Framework in Brazil: Genuine or Gattopardo change?," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 17.
    3. Peter Docherty, 2012. "Keynes’s General Theory, the Quantity Theory of Money and Monetary Policy," Chapters, in: Thomas Cate (ed.), Keynes’s General Theory, chapter 6, Edward Elgar Publishing.

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    Keywords

    Economics and Finance;

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