Rather monetary policy actions need to be calibrated to impart the  Page 8  appropriate impulse to inflation at the 18-24 month horizon when the lags in policy transmission unwind. Fourth, emphasis of the need for a nominal framework within which to analyse and communicate monetary policy. And fifth, adherence to the view that monetary quantities (i.e. specific safe and liquid liabilities on the balance sheets of the central bank and/or commercial banks) play an important and distinct role in the transmission mechanism of monetary policy actions to the price level. The key assertion here is not that the central bank should use a quantity measure of money as its policy instrument rather than a short-term interest rate – that is something resolved pragmatically through the Poole considerations discussed above. Instead it is the contention that failure to incorporate monetary quantities in models of monetary transmission excludes important channels through which monetary policy works: policy analysis without money is subject to specification bias. Viewed from today’s perspective, the striking thing about this list – in particular, given the doctrinal tensions between monetarist and Keynesian camps of monetary and macro economists in the 1970s – is how many of the monetarist tenets have become mainstream. Any reputable modern monetary policy framework or strategy purports to embrace the first four of these elements, albeit with some of the flexibility needed to turn an academic argument into a policy programme. For sure, how these elements are presented and communicated varies across jurisdictions, reflecting different histories, experiences and contexts.

‘No money, no inflation: The role of money in the economy,’ Bank of England Quarterly Bulletin, Summer, pp. 162-177. Masuch, K., S. Nicoletti-Altimari, M. Rostagno and H. Pill (2004). ‘The role of money in monetary policymaking,’ BIS papers no. 19, pp. 158-191. Poole, W. (1968). ‘Commercial bank reserve management In a stochastic model: Implications for monetary policy,’ Journal of Finance, Vol. 23, no. 5, pp. 769-791. Rotemberg, J.J. and M. Woodford (1997). “An optimisation-based econometric framework for the evaluation of monetary policy” in B. Bernanke and J.J. Rotemberg (eds. ), NBER Macroeconomics Annual 1997, MIT Press. Sargent, T.J. and N. Wallace (1973). ‘Rational expectations and the dynamics of hyperinflation,’ International Economic Review, Vol. 14, no. 2, pp. 328-50. Tobin, J. (1958). ‘Liquidity preference as behaviour towards risk,’ The Review of Economic Studies, Vol. 25, no. 2, pp. 65-86 Woodford, M (2003). Interest and prices: Foundations of a theory of monetary policy, Princeton University Press. Page 18  1. See King (2002). 2. See Friedman (1970), p. 24. 3. See Bernanke (2004). 4. See the discussion of this in Masuch, et al. (2004). 5. See Goodhart (1989). 6. See Poole (1968). 7. That would be in the spirit of the traditional monetarist arguments made by Friedman (1963) and Brunner and Meltzer (1988), as well as reflecting the portfolio models of Tobin (1958) that lie outside the monetarist tradition. 8. See the arguments made in IIMR (2022) and Jessop (2022). 9. See the discussion of these issues in Bernanke (2003). 10.