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Recent writings in the so-called`credit view' focus on binding finance constraints of macroeconomic activity which arise from the incomplete substitutability of bank credit and from changes in borrowers' net worth. They criticize the standard approaches in the`money view' for not taking full account of the observable effects of monetary restrictions on real activity. In this paper, the`new credit view' is contrasted with older macroeconomic theories that placed special emphasis on the banks' systemic potential to expand credit beyond planned saving. The comparative discussion of the underlying arguments about bank behaviour, about the non-neutrality of credit money, and about the transmission of monetary policy impulses reveals some shortcomings in the new view. History helps, moreover, to set the conventional confrontations of thè credit view' and the`money view' in perspective. JEL-classification: B22, E32, E44, E51, E52

The New Neoclassical Synthesis that Michael Woodford puts forward in his Interest and Prices (2003) is primarily a synthesis of New Classical and New Keynesian ideas. Yet Woodford presents it as an encompassing approach that goes much further back in time to integrate the pre-Keynesian macroeconomics of Knut Wickseil and his followers. Starting with the title, the book contains many references to Geldzins und Güterpreise (1898), Wicksell's landmark contribution to monetary theory which was translated as Interest and Prices in 1936. Woodford relates his concept of a “monetary policy without money” to Wicksell's concept of the pure credit system and to Wicksell's proposal to eliminate inflation by adjusting nominal interest rates to changes in the price level—an idea that has much in common with modern policy rules à la Taylor. He presents the core model of the new synthesis (in shorthand: IS + AS + Taylor rule) as a “neo-Wicksellian framework” that serves to analyze the dynamics of interest-rate gaps and output gaps (2003, chapter 4). Referring to the Wicksellians of the 1920s and 1930s (primarily Erik Lindahl, Gunnar Myrdal, and Friedrich A. Hayek), Woodford grounds his advocacy of rules to fight inflation on the potential non-neutrality of monetary policy: “[I]t is because instability of the general level of prices causes substantial real distortions—leading to inefficient variation both in aggregate employment and output and in the sectoral composition of economic activity—that price stability is important” (2003, p. 5). He thus sees his analysis of interest-rate and output gaps as “an attempt to resurrect a view” that the old Wicksellians had developed in their analyses of cumulative processes.

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