ABSTRACT
The field of monetary theory has been developing very rapidly during the past 10 years, as a result of a variety of influences. These influences include the attractive theoretical intricacy of monetary problems, particularly the incentive to formulate monetary theory in terms of more modern general equilibrium concepts. That particular strand of development goes back to the effort of Oscar Lange to translate Keynesian theory into general equilibrium theory, and continues through the work of Lloyd Metzler, Don Patinkin, R. M. Clower and a number of other primarily mathematical economists. 1 The most important influence on the field, however, has been the fact that monetary policy has been revived as a major instrument of economic policy. The revival of monetary policy in postwar circumstances has raised a great many evident problems—questions of how monetary policy works (if it works), what it can do, and so forth—which have given a policy orientated edge to interest in the field. In particular, there have been three major inquiries into monetary policy: by the Radcliffe Committee in England, the Commission on Money and Credit in the United States, and the Royal Commission on Banking and Finance in Canada. 2 All of these have meant that economists either have been persuaded or have been bribed to turn their attention to the question of how monetary policy works; and the result has been a very rapid development of theoretical concepts and of econometric studies, as well as of general knowledge about how monetary affairs are conducted.
