In reply to Allin's OPE-L:5377:
>Duncan wrote:
>
>> The problem for me is to understand how central bank policy affects the
>> price level, as opposed to the level and rate of growth of output through
>> its influence on the expansion of credit (both bank and other.) Are you
>> implicitly assuming a Phillips' Curve that links the expansion of the
>> economy to the rate of increase of money wages and prices?
>
Allin replies:
>Of sorts. The parameters don't have to be stable. I suppose I'm
>assuming that the Fed is able (more or less) to engineer the inflation
>rate it wants by changing the price and availability of credit -- i.e.
>there will generally be _some_ degree of monetary tightening that will
>slow inflation, if not immediately then before too long.
Duncan comments:
This way of looking at things seems to me to import a Keynesian theory of
money wages and prices (determined historically, but subject to a kind of
Phillips' curve) into the story. I don't think this would be consistent
with Marx's theory of money in the commodity-money case (despite the fact
that credit availability and the level of unemployment can vary in the
commodity-money case as well.)
Cheers,
Duncan
Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
(212)-854-3790
fax: (212)-854-8947
e-mail: dkf2@columbia.edu