(i) Kocherlakota says this:
Monetary policy does affect the real return on safe investments over short periods of time.This seems uncontroversial. He is recognizing that there are short-run nonneutralities of money - tight monetary policy can make the real rate of interest go up. Then he says:
But over the long run, money is, as we economists like to say, neutral. This means that no matter what the inflation rate is and no matter what the FOMC does, the real return on safe short-term investments averages about 1-2 percent over the long run.Again, uncontroversial. You can quibble about super-nonneutralities here, but I think the consensus is that, for the types of changes in rates of long-run inflation we are talking about here, those effects are small. Then he says:
Long-run monetary neutrality is an uncontroversial, simple, but nonetheless profound proposition. In particular, it implies that if the FOMC maintains the fed funds rate at its current level of 0-25 basis points for too long, both anticipated and actual inflation have to become negative.This seems to be what set everyone off. This is a statement about the long run. My interpretation of this is that this is just Irving Fisher. What does it mean to "maintain the fed funds rate at its current level?" Some people seem to think the Fed can't do this. Krugman and a number of other people cite Wicksell, and argue that it's impossible. My reading of the implications of Wicksell (and remember that Wicksell expressed himself in words, not math, so he's hard to interpret) is that the Fed cannot peg the real rate forever. Friedman said something like this too, but I don't have the quote. I know that there are issues about nominal interest rate policy rules and determinacy. However, Woodford thinks he solved those problems. I replied to most of the comments I had time for, or could understand. Some people had what I thought were confused notions of equilibrium. In other cases, as in the link you mention, there are people concerned about disequilibrium phenomena. These approaches are or were popular in Europe - I looked up Benassy and he is still hard at work. However, most of the mainstream - and here I'm including New Keynesians - sticks to equilibrium economics. New Keynesian models may have some stuck prices and wages, but those models don't have to depart much from standard competitive equilibrium (or, if you like, competitive equilibrium with monopolistic competition). In those models, you have to determine what a firm with a stuck price produces, and that is where the big leap is. However, in terms of determining everything mathematically, it's not a big deal. Equilibrium economics is hard enough as it is, without having to deal with the lack of discipline associated with "disequilibrium." In equilibrium economics, particularly monetary equilibrium economics, we have all the equilibria (and more) we can handle, thanks.
Anything else I can do for you?