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Cover -- Half Title -- Title Page -- Copyright Page -- Original Title Page -- Original Copyright Page -- Table of Contents -- List of Tables -- List of Figures -- Notation -- Preface -- Part I Theory -- 1 A New Keynesian framework for macroeconomic policy -- 1.1 An overview of the ideas in this book -- 1.1.1 New Keynesian financial policy: objectives and instruments -- 1.1.2 The labour market -- 1.1.3 An exchange-rate intermediate target -- 1.1.4 Expectations formation -- 1.1.5 Small models, large models, and control theory -- 1.2 Three policy frameworks compared -- 1.2.1 The Keynes-Bretton Woods framework and its demise -- 1.2.2 The monetarist framework and its demise -- 1.2.3 The New Keynesian framework -- 1.3 Financial policy explained -- 1.3.1 Money GDP as a financial target -- 1.3.2 National wealth as a financial target -- 1.3.3 The rate of interest as the instrument of monetary control -- 1.3.4 The rate of tax as the instrument of fiscal control -- 1.3.5 'Instrument-target emphasis': the linkages of financial targets to financial instruments -- 1.4 Wage fixing and its implications for financial policy -- 1.5 Exchange-rate management -- 1.5.1 The case for foreign exchange rate targeting -- 1.5.2 The foreign exchange rate as an intermediate target -- 1.6 Expectations -- 1.7 The form of control -- 1.8 International aspects of policy rules -- 1.9 Outline of subsequent chapters -- 2 The linkages between financial weapons and financial targets: a comparative static analysis -- 2.1 Linkages and emphasis -- 2.2 The model of a closed economy -- 2.2.1 Assumptions -- 2.2.2 Basic equations -- 2.2.3 Comparative statics -- 2.2.4 Comparative advantage and emphasis -- 2.3 The control of inflation and wealth in a closed economy -- 2.4 The availability of free lunches -- 2.5 The open economy -- 2.6 Conclusion -- 3 The dynamics of price stabilization.