New developments in monetary economics: two ghosts, two eccentricities, a fallacy, a mirage and a mythos. 2004 Royal Economic Society Hahn Lecture

Monetary theory and policy are part of intertemporal public finance. The two ghosts are the liquidity trap and the real balance effect. The eccentricities are negative nominal interest rates and the helicopter drop of money. The fallacy is the Fiscal Theory of the Price Level, a logically inconsistent theory of the link between the government's intertemporal budget constraint and the general price level. The mirage is the prediction that financial deregulation and technical change in the payments and settlements technology will cause monetary policy to lose its capacity to influence even nominal economic variables. Mythos refers to the independent central bank.