THEORY OF MONETARY POLICY: TOWARDS A REFOUNDATION

Our purpose is to give an account of the renewal of monetary policy theory triggered by recent works on the interest rates rules. First we will offer a reminder on the Taylor principle before turning to a discussion on the form of optimal monetary rules. We shall then contend that a transparent monetary policy is enough to answer the credibility issue, whose importance was probably overrated. We will go on to demonstrate how it is possible with no significant loss to give up the writing of a money market in macroeconomic models. However, frictions on the credit market may lead to introduce non-linearities in the usual forms of monetary rules and to complement them by taking asset prices into account.