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Central Bank Interest-Rate Control in a Cashless, Arrow-Debreu Economy: A Comment on Wallace

Author

Listed:
  • Colin Rogers

    (School of Economics, University of Adelaide)

Abstract

Wallace attempts to analyse central bank interest rate control in a cashless, Arrow-Debreu economy. The model incorporates only the unit of account function of money and exhibits a version of the classical dichotomy in which arbitrary accounting prices are independent of the equilibrium real relative price vector. A model with these properties is incapable of providing a theory of the price level or inflation, nominal interest rate rules or justifying a role for the central bank. Nominal magnitudes are nominal in name only and Wallace's analysis is without theoretical foundations. It generates a series of conceptual and logical puzzles.

Suggested Citation

  • Colin Rogers, 2006. "Central Bank Interest-Rate Control in a Cashless, Arrow-Debreu Economy: A Comment on Wallace," School of Economics and Public Policy Working Papers 2006-04, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2006-04
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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp2006-04.pdf
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