Should a modern central bank still care about money?

Does money still matter for modern monetary policy? If you thought the beast was dead, you could not be more wrong. The subject of whether monetary aggregates matter for a central bank remains one of the big issues of modern monetary economics, but the discussion about this subject differs fundamentally from the discussion several decades agoThis is a distinctly European issue in the sense of the major central banks in the world, only the European Central Bank still makes explicit reference to money in its policy formulation. The ECB has adopted a two-pillar strategy, in which standard economic analysis, based on a neo-Keynesian forecasting model, forms the first pillar, while monetary analysis constitutes the second pillar of policy. The ECB is sometimes described as monetarist, partly...

Should Central Banks target asset prices?

One of the most controversial issues in modern macroeconomics is the question whether the central should prick, target, take an interest or ignore asset price bubbles. It is a multi-faceted subject, on which no consensus has yet emerged, which is in part a reflection of much ongoing research in this area. This briefing note is in part related to the briefing note about whether money has a role to play in modern central bank. Some of the arguments are parallels, and pro-bubble-pricking advocates also tend to favour to rely on monetary aggregates, at least to some extent.

Interest in this subject was sparked by the Federal Reserve's monetary policy in the mid-to-late 1990s, a period characterised by Alan Greenspan, former governor of the Fed, as one of "irrational exuberance" as early as...