Show Summary Details

Page of

PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice).

date: 02 December 2020

Abstract and Keywords

It is shown that New Keynesian monetary theory is a scientific illusion because it rests on moneyless Walrasian general equilibrium microfoundations. Walrasian general equilibrium models require a Walrasian or an Arrow-Debreu auction, but this auction is a substitute for money and empties the model of all the issues of interest to regulators and central bankers. The New Keynesian model perpetuates Patinkin’s “invalid classical dichotomy” and is incapable of providing any guidance on the analysis of interest rate rules or inflation targeting. In its cashless limit, liquidity, inflation, and nominal interest rate rules cannot be defined in the New Keynesian model.

Keywords: Walrasian-Arrow-Debreu auction, consensus model, Walrasian general equilibrium microfoundations, cashless limit

Access to the complete content on Oxford Handbooks Online requires a subscription or purchase. Public users are able to search the site and view the abstracts and keywords for each book and chapter without a subscription.

Please subscribe or login to access full text content.

If you have purchased a print title that contains an access token, please see the token for information about how to register your code.

For questions on access or troubleshooting, please check our FAQs, and if you can''t find the answer there, please contact us.