Monetary Theory and Policy presents an advanced treatment of critical topics in monetary economics and the models economists use to investigate the interactions between real and monetary factors. It provides extensive coverage of general equilibrium models of money, models of the short-run real effects of monetary policy, and game-theoretic approaches to monetary policy. Among the topics covered are money-in-the-utility-function models, cash-in-advance models, money and public finance, the credit channel of money, models of time inconsistency, monetary policy operating procedures, and interest rates and monetary policy. The book has three innovative aspects. It uses dynamic simulations to evaluate quantitatively the significance of the channels through which monetary policy and inflation affect the economy. It extensively examines modern approaches to monetary policy that stress the incentives facing central banks and the strategic interactions between central banks and the private sector. Where most treatments of monetary policy emphasize money supply control and money demand, this book focuses on the implications of interest rate control for monetary policy. The book is designed for use in first-year graduate courses in macro theory and second-year courses in monetary economics, for economic researchers in need of a systematic summary of recent developments in the field, for economists working in policy institutions, and for central bank staff economists.