Doing without money: a critical assessment of Woodford's analysis

Abstract

Woodford employs an inter-temporal general equilibrium model to examine the properties of the monetary system as it evolves from the use of a physical medium of exchange to an electronic medium. He presents a structure in which cash as a means of payment can be made to vanish at the limit, but where he claims the price level remains determinate. It is shown that Woodford's analysis involves fundamental but still widespread conceptual and methodological errors. His general equilibrium model does not map into the world of electronic money, and his analysis has no implications for the art of central banking.