Interest and Prices: Foundations of a Theory of Monetary Policy Illustrated Edition

Michael Woodford, Interest & Prices, Princeton University Press, 2003, has the same title as Knut Wicksell's (1898) book. This is a thick reprise including 785 pages of tiny font. On the cover flap, Assaf Razin called the book a “masterpiece” and lauds the “remarkable convergence” of what can be called groupthink. William Brock wrote that the author is “one of the world’s most original thinkers in economics.” In the preface, the author lists many famous economists’ teachers of groupthink in elite American universities.This book reminds me of the (Albert Camus called it absurd) work of Sisyphus because many equations and arguments are repeated. The equation system is not well-specified, and there is little concern with empirics. I guess the escapade is that the book’s subtitle is: Foundation of a THEORY of Monetary Policy. Obviously, there is a lot of labor reflected on this book, but a large fraction can be cut.If in (equation 4.1) the interest rate = α + b LN(“some general price index that the policy aims to stabilize”), how do we conceive Irving Fisher’s asset value as the present value discounted by said interest rate?I searched but did not find the quantity of money equation considering the money supply as endogenous à la Keynes specification, where M(Y, i) = a Y – b (Interest rate per equation 4.1).We get a circuitous “general price index” equation. Please consider the “general” price equation in which the dependent variable (general price index) cannot be calculated independent of quantity weights, and in which the independent variable is reduced to the interest rate that is reduced to the general price index.This book is a pompous affirmation that groupthink is a sign of decadent (uniform, convergent, elite-minded) academia. Only credulous students and like-travelers can get inebriated with such dense fluff and laborious algebraic manipulations.

For sure this will become a masterpiece in modern monetary policy. It is very well detailed, and discusses what is really important in the field.It is already a reference book, and must be read by practitioners, students and academicians interested in the subject.However the book has the following caveats:- It is too verbose. That means that you might have the same deepness with less words. As a consequence the reader often gets tired, bored and misses the main point;- It does not talk about conventional monetary policy as you could find in Walsh's "Monetary Theory and Policy";- Trying to make the exposition easier, the models are presented in separeted too far apart pieces. This makes it difficult to fully grasp the details at once.In view of this, I must say that Walsh's book might become a necessary complements to Woodford's. Notice that the styles and goals of both books are different. Therefore, buying one or another depends on your intentions.In additon I'd say that Woodford's overall strategy is right in terms of the sequence of subjects treated. However, shorter and more numerous chapters might improve the exposition tactics.

Quite difficult, but worth reading.

nice book~

This book is written by one of the giants in modern macroeconomics. Although a little bit lengthy, the book contains nearly all the recent advance in monetary economics, especially in the interest rate rules and optimal monetary policy. Of course, you should be familiar with log linearization and simple matrix algebra in order to access the mathematics of the book. Woodford¡¦s Interest and prices and Walsh¡¦s Monetary Theory and Policy (2nd edition) would definitely become the required text for every graduate course in monetary economics around the world.

It's a most compehensive and thought-provoking treatise on modern monetary economics, an excellent follow-up to Carl Walsh's Monetary Theory and Policy. I think this reviewer who gives the book 2 stars just on account of one technical error that he claims to have discovered is being extremely myopic. The book is not about solutions to stochastic difference equations and neither does the author claim to be an expert at stochastic difference equations. The book handles what it is meant to handle admirably well, i.e. MONETARY ECONOMICS

I just can't wrap my head around this given the 750 pages of education, received from "The Great Deformation" by David A. Stockman The Great Deformation: The Corruption of Capitalism in America I am truly trying to be devils advocate, but so far I say bring back Paul Adolph Volcker, When Case shiller index reaches the previous high I say jack 6 points on interest,wash out the gamblers & let the cannons of wall street burn while main street can seek cover. Bring the savers back to the table, to be continued.Michael Woodford, could you put your student loans on the table, then put every student that helped you with this book, loans on the table, then describe to me the difference. It is the very essence of the core formulas that have no check or balance.

great

The most influential achievement in macroeconomics in the past generation has been the formulation, and application to problems of macroeconomic policy, of a class of dynamic, stochastic models with a recursive, perfectly competitive, rational-expectations (RE) equilibrium concept. Such models include those studied by Robert E. Lucas Jr. and Edward C. Prescott (1971, 1974), Lucas (1972, 1976), Finn E. Kydland and Prescott (1977, 1982), John B. Long and Charles I. Plosser (1983), and Lucas and Nancy Stokey (1987). Michael Woodford’ Interest and Prices1 is the preeminent exposition of an alternative version of RE theory that would rehabilitate the type of macroeconomic stabilization policy that the competitive version overturns, while incorporating the methodological advances of competitive RE theory Woodford’s particular theory has some distinctive features—notably, that a real-balance effect plays only a peripheral role. (Woodford describes this as a “new Wicksellian” theory as opposed to a “new Keynesian” theory, the term used by most researchers studying similar models.) However, substantial sections of the book are devoted to extending his theory in ways that make connections to related theories and to investigating why theories with similar assumptions yield disparate conclusions about some issues. For this reason, as well as on account of the intrinsic interest of Woodford’s theory itself, Interest and Prices is likely to serve as a frame for discourse among proponents of alternative RE theories for many years.In addition, the book is likely to be a bible for central bank economists who regard themselves as having a public charge to design and implement stabilization policy as best they can (even if good policy has only limited effect), and who require a coherent and tractable analytic framework for accomplishing that task.I highly recommend this book. It is must have for every monetary economist, graduate student of monetary economics, and researcher in the field of monetary economics, and monetary policy makers and anybody who studies and formulate the monetary policies of central banks and like institutions.

Woodword uses mathematics in the same way Hegel uses words.

I bought it used, but it was as good as new.No scratch or mark.Very fast delivery