Designed for advanced undergraduates in economics, this text provides an up-to-date analysis of the practice and theory of monetary policy and discusses key models that tie in with contemporary research and policy. The transmission mechanism of monetary policy is given particular emphasis and the book discusses the behaviour of a number of central banks, in particular the Bank of England, the European Central Bank and the Federal Reserve. The worldwide credit crunch and subsequent recession and non-conventional monetary policies such as quantitative easing are also given extensive treatment. There are also chapters on a wide variety of topics such as consumption, investment, money demand and money supply, nominal rigidities, inflation and unemployment, time inconsistency and central bank independence, the social costs of inflation, the role of financial intermediaries, monetary policy in an open economy, the term structure of interest rates, the stock market, the housing market and fiscal policy.