Purpose: This study describes a unique monetary reaction rule adopted by the Lebanese Central Bank. Unlike international standards in most countries, the Lebanese monetary rule maintains the supply and demand of money in equilibrium and neutralises money shocks. The paper determines whether...

Monetary policy has three tenets: a stable money demand function, a well specified velocity of money and a reliable money creation process. The first tenet determines real money on the demand side of the market and the third fixes nominal money on the supply side. The article finds that these...