Notice that so far I have not mentioned anything about demand factors or economic
fluctuations more broadly. This partly reflects the division of macroeconomic research into
two largely separate parts: i) the analysis of long‐run growth, which is linked to structural
elements of the economy; and ii) the short term analysis, which emphasizes the effects of
various shocks and how macroeconomic policies should be conducted to stabilize the
economy. A key assumption in all this is that money is neutral. That is, monetary policy has
no lasting impact on real output but only on prices. And given that inflation is detrimental to
long‐run growth, the standard conclusion is that the best contribution that monetary policy
can make to long‐run growth is to maintain price stability.