Monetary economics

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Monetary economics is a branch of economics that provides a framework for analyzing money in its functions as a medium of exchange, store of value, and unit of account. It considers how money, for example fiat currency, can gain acceptance purely because of its convenience as a public good.[1] It examines the effects of monetary systems, including regulation of money and associated financial institutions[2] and international aspects.[3]

The discipline has historically prefigured, and remains integrally linked to, macroeconomics.[4] Modern analysis has attempted to provide microfoundations for the demand for money[5] and to distinguish valid nominal and real monetary relationships for micro or macro uses, including their influence on the aggregate demand for output.[6] Its methods include deriving and testing the implications of money as a substitute for other assets[7] and as based on explicit frictions.[8]


Serious interest in the concepts behind money occurred during the dramatic period of inflation known as the Price Revolution, during which the value of gold fell precipitously, sometimes fluctuating wildly, because of the importation of gold from the New World, primarily by Spain.

At the end of this period, the first modern texts on monetary economics were beginning to appear.

In 1705, John Law in Scotland published Money and Trade, which examined the failure of metal-based money during the previous 150 years, and proposed replacing it with a land bank system of paper money based on the value of real estate. Though he succeeded in getting this proposal implemented, he failed to take the lessons of the Spanish Price Revolution seriously enough, and his bank failed, a bubble of speculation collapsing into extreme inflation.

Then, in 1720, Isaac Gervaise wrote The System or Theory of the Trade of the World, blaming mercantilism and state-supported credit for the inflation problems of his era, doing so in a careful, scientific way that is still respected in the 21st century.

Della Moneta, was published by Ferdinando Galiani in 1751, and is arguably the first modern text on economic theory. This was 25 years before Adam Smith's more famous book, The Wealth of Nations, the latter of which touched on some of the same topics.

Della Moneta covered all major modern monetary concepts, including the value, origin, and regulation of money. Presumably because of the previous period of unreliable monetary value, he carefully examined the possible causes for money's value to fluctuate.

During this same century, the concept of bank notes became more common in Europe. David Hume referred to it as "this new invention of paper".[9] In his own book published the year following Galiani's, Of the Balance of Trade, Hume argues that one need not worry about the import or export of goods creating a surplus or shortage of either money or goods, because an excess or shortage of money will always increase or decrease demand, until equilibrium is reached. In modern economic terms, this is as equilibration through the price-specie flow mechanism.

Research areas[edit]

Traditionally, research areas in monetary economics have included:

Current state[edit]

Since 1990, the classical form of monetarism has been questioned. This is because of events which many economists interpret as inexplicable in monetarist terms, especially the unhinging of the money supply growth from inflation in the 1990s and the failure of pure monetary policy to stimulate the economy in the 2001-2003 period. Alan Greenspan, former chairman of the Federal Reserve, argued that the 1990s decoupling may be explained by a virtuous cycle of productivity and investment on one hand, and a certain degree of "irrational exuberance" in the investment sector.

In 2011, Christopher Sims won the Nobel Prize.[29] His paper,'Does Monetary Policy Generate Recessions' used an identified vector autoregression model to show that the elasticity of money demand is greater than zero. The implication of this result is that fiscal stimulus is effective and monetary contractions aren't the sole cause of recessions.[30] This result conflicts with the monetarist findings of Milton Friedman.

See also[edit]


  1. ^ James Tobin, 1992. "money," The New Palgrave Dictionary of Finance and Money, v. 2, pp. 770-79 & in 2008, The New Palgrave Dictionary of Economics. 2nd Edition. Table of Contents and Abstract. Reprinted in Tobin, 1996, Essays in Economics, v. 4, pp. 139-63. MIT Press.
       • _____, 1961. "Money, Capital, and Other Stores of Value," American Economic Review, 51(2), pp. 26-37. Reprinted in Tobin, 1987, Essays in Economics, v. 1, pp. 217-27. MIT Press.
       • Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, 66(6), pp. 467, 481-82.
       • John Bryan, 1980. "Transaction Demand for Money and Moral Hazard," in Models of Monetary Economies, ed. J. Kareken and N.Wallace, Federal Reserve Bank of Minneapolis, pp. 233-241 and References, pp. 305-13.
       • Nobuhiro Kiyotaki and Randall Wright, 1989, "On Money as a Medium of Exchange," Journal of Political Economy 97(4), pp. 927-54.
       • _____, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, 83(1), pp. 63-77.
  2. ^ • J.H. Boyd, 2008. "financial intermediation," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
      • Sudipto Bhattacharya, Anjan V. Thakor, and Arnoud W.A. Boot, 1998. "The Economics of Bank Regulation," Journal of Money, Credit, and Banking, 30(4), pp. 745-770.
  3. ^ • Stanley W. Black, 2008. "international monetary institutions," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
       • Robert A. Mundell, 1971. Monetary Theory: Interest, Inflation and Growth in the World Economy. Goodyear. Description.
       • Bennett T. McCallum, 1996. International Monetary Economics. Oxford. Description & chapter-preview links.
       • Maurice Obstfeld and Kenneth S. Rogoff, 1996. Foundations of International Macroeconomics. MIT Press, Ch. 8-10. Description.
  4. ^ • Robert W. Dimand, 2008. "macroeconomics, origins and history of" (abstract) and "monetary economics, history of" (abstract), The New Palgrave Dictionary of Economics. 2nd Edition.
      • Christina D. Romer and David H. Romer, 2007:2. "Monetary Economics," NBER Reporter, pp. 1-6 Abstract-links version.
      • JEL classification codes#Macroeconomics and monetary economics JEL: E Subcategories.
      • David Hume, 1752. "Of Money," "Of Interest," and "Of the Balance of Trade" in Essays, Moral, Political, and Literary. Reprinted in Hume, 1955, Writings on Economics, Eugene Rotwein ed., linked Table of Contents.
      • Thomas Mayer, 1980. "David Hume and Monetarism," Quarterly Journal of Economics, 95(1), pp. 89-101.
      • Henry Thornton, 1802. Paper Credit. Contents, pp. ix-xii, & chapter links. Introduction by Friedrich Hayek, 1938.
      • W. Stanley Jevons, 1876 [1919]. Money and the Mechanism of Exchange. Chapter-preview links.
      • Carl Menger, 1892. "On the Origin of Money," Economic Journal, 2(6), pp. 239–255.
      • Knut Wicksell, [1898] 1936. Interest and Prices, tr. R.F. Kahn. Macmillan, Chapter links, pp. v-vi.
      • _____, [1906] 1929. Lectures on Political Economy, v. 2: Money, tr. E. Classen, 1935. Discussed in Lionel Robbins' Introduction to v. 1: General Theory, pp. xv-xviii.
      • A.C. Pigou, 1917. "The Value of Money." Quarterly Journal of Economics, 32 ( 1), pp. 38-65. Reprinted in part in A.C. Pigou (1924), Essays in Applied Economics, pp. 175- 204.
      • Fisher, Irving, [1911] 1922, 2nd ed.. The Purchasing Power of Money: Its Determination and Relation to Credit, Interest, and Crises, Chapter links.
      • John Maynard Keynes, 1923. A Tract on Monetary Reform. Macmillan. Reviews, 1924 & 1996.
      • _____, 1936. The General Theory of Employment, Interest and Money. Macmillan.
      • Gary S. Becker and William J. Baumol, 1952. "The Classical Monetary Theory: The Outcome of the Discussion," Economica, NS 19(76), pp. 355-376.
      • Paul A. Samuelson, 1968. "What Classical and Neoclassical Monetary Theory Really Was," Canadian Journal of Economics, 1(1), pp. 1-15, & Collected Scientific Papers, 1972, v. III. pp. 529-543.
      • Robert Clower, 1969b. "What Traditional Monetary Theory Really Wasn't," Canadian Journal of Economics. 2(2), pp. 299-302.
      • David E.W. Laidler, 1991. The Golden Age of the Quantity Theory: The Development of Neoclassical Monetary Economics, 1870-1914. Princeton UP. Description and review.[permanent dead link]
      • Bennett T. McCallum, 1989. Monetary Economics: Theory and Policy. Macmillan. Preview.
  5. ^ William J. Baumol 1952. "The Transaction Demand for Cash: An Inventory Theoretic Approach," Quarterly Journal of Economics, 66(4), pp. 545–556.
       • James Tobin, 1956. "The Interest-Elasticity of Transactions Demand for Cash," Review of Economics and Statistics, 38(3), pp. 241-247.[permanent dead link] Reprinted in Tobin, Essays in Economics, v. 1, Macroeconomics, pp. 229- [1] 242.
       • _____, 1958. "Liquidity Preference as Behavior Towards Risk," Review of Economic Studies 25(1), pp. 65–86.
       • Milton Friedman, 1956. "The Quantity Theory of Money: A Restatement," in Studies in the Quantity Theory of Money, Chicago. Reprinted in The Optimum Quantity of Money, 2005), pp. 51-67.
  6. ^ Robert Clower, 1967. "A Reconsideration of the Microfoundations of Monetary Theory," Western Economic Journal, 6(1), pp. 1-8.
       • _____, 1987. Money and Markets. Cambridge. Description and chapter-preview.
       • David Laidler, 1988. "Taking Money Seriously," Canadian Journal of Economics, 21(4), pp. 687-713.
       • _____, 1993. The Demand for Money: Theories, Evidence, and Problems, 4th ed. Description.
       • _____, 1997. "Notes on the Microfoundations of Monetary Economics," Economic Journal, 107(443), pp. 1213-1223.
       • Don Patinkin, 1965, 2nd ed. Money, Interest and Prices: An Integration of Monetary and Value Theory. New York: Harper and Row. Introduction to 1990 MIT edition (PDF), and 1991 evaluation by Stanley Fischer.
       • Michael Woodford, 2003. Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton University Press. Description and Table of Contents..
  7. ^ • James Tobin, 1969. "A General Equilibrium Approach To Monetary Theory," Journal of Money, Credit and Banking, 1(1), pp. 15-29.
       • _____ with Stephen S. Golub, 1998. Money, Credit, and Capital. Irwin/McGraw-Hill. TOC.
       • Stephen M. Goldfeld and Daniel E. Sichel, 1990. "The Demand for Money," in Handbook of Monetary Economics, v. 1, pp. 299-356. Outline. Elsevier.
       • Subramanian S. Sriram, 2001. "A Survey of Recent Empirical Money Demand Studies," IMF Staff Papers, 47(3). International Monetary Fund. pp. 334-65.
  8. ^ • Robert M. Townsend, 1980. "Models of Money with Spatially Separated Agents," in John H. Kareken and Neil Wallace, ed., Models of Monetary Economies pp. 265-303. Federal Reserve Bank of Minneapolis.
       • Neil Wallace, 2001. "Whither Monetary Economics?," International Economic Review, 42(4), pp. p. 847-869.
       • Ricardo Lagos and Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, 113(3], pp. 463-84.
  9. ^ History of Monetary and Credit Theory
  10. ^ William A. Barnett, 2008. "monetary aggregation," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
       • Phillip Cagan, 1965. Determinants and Effects of Changes in the Stock of Money, 1875-1960. NBER. Foreword by Milton Friedman, pp. xiii-xxviii. Table of Contents.
       • Milton Friedman and Anna Jacobson Schwartz, 1970. "Introduction," Monetary Statistics of the United States. Princeton. pp. 89-92. Review, Allan H. Meltzer, 1971. J of Business, 44(3), pp. 335-337.
       • Paul A. Spindt, 1985. "Money Is What Money Does: Monetary Aggregation and the Equation of Exchange," Journal of Political Economy, 93(1), pp. 175-204.
       • Michael T. Belongia, 1996. "Measurement Matters: Recent Results from Monetary Economics Reexamined," Journal of Political Economy, 104(5), pp. 1065-1083.
  11. ^ Ben S. Bernanke, 1995. "The Macroeconomics of the Great Depression: A Comparative Approach," Journal of Money, Credit and Banking, 27(1), pp. 1-28.
       • _____, 1983. "Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression," American Economic Review, 73(3), pp. 257-276. Reprinted with Bernanke, 1995 (above), in Bernanke, 2005, Essays on the Great Depression, Princeton. Description, TOC as ch. 1-2.
       • _____ and Mark Gertler, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, 79(1), pp. 14-31.
       • Irving Fisher, 1933. "The Debt-Deflation Theory of Great Depressions," Econometrica, 1(4), pp. 337-357.
       • P. Bridel, 2008. "credit cycle," The New Palgrave Dictionary of Economics, 2008. 2nd Edition. Abstract.
       • Mark Gertler, 1988. "Financial Structure and Aggregate Economic Activity: An Overview," Journal of Money, Credit and Banking, 20(3), pp. 559-588.
       • Steven Gjerstad and Vernon L. Smith, 2009. "From Bubble to Depression?" Wall Street Journal, April 6.
       • Hyman P. Minsky, 1957. "Monetary Systems and Accelerator Models,"American Economic Review, 47(6), pp. 860-883.
       • Steve Fazzari and Hyman Minsky, 1984. "Domestic Monetary Policy: If Not Monetarism, What?" Journal of Economic Issues, 18(1), "Economic Policy for the Eighties and Beyond," pp. 101-116. Reprinted in M. Tool, ed. , 1984, An Institutionalist Guide to Economics and Public Policy, pp. 101-116.
       • Lance Taylor and Stephen A. O'Connell, 1985. "A Minsky Crisis," Quarterly Journal of Economics, 100(3, Supplement), pp. 871-885.
       • Mervyn King, 1994. "Debt Deflation: Theory and Evidence," European Economic Review, 38(3-4), pp. 419-445. Abstract.
       • Enrique G. Mendoza, 2006. "Lessons from the Debt-Deflation Theory of Sudden Stops," American Economic Review, 96(2), pp. 411-416. Abstract.
       • Nobuhiro Kiyotaki and John H. Moore, 1997. "Credit Cycles," Journal of Political Economy, 105(2), pp. 211-248.
       • Guillermo A. Calvo and Enrique G. Mendoza, 2000. "Capital-Markets Crises and Economic Collapse in Emerging Markets: An Informational-Frictions Approach,' American Economic Review, 90(2), pp. 59-64.
       • Wynne Godley and Marc Lavoie, 2007. Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth. Palgrave MacMillan. Description & contents links and review.
  12. ^ Karl Brunner and Allan H. Meltzer, 1988. "Money and Credit in the Monetary Transmission Process," American Economic Review, 78(2), pp. 446-451.
       • Edward Nelson, 2002. "Direct Effects of Base money on Aggregate Demand: Theory and Evidence," Journal of Monetary Economics, 49(4), pp. 687-708. Abstract.J. M. Keynes, 1937. "The General Theory of Employment," Quarterly Journal of Economics, 51, (2), pp. 209-223.
       • Anthony M. Santomero and John J. Seater, 1981. "Partial Adjustment in the Demand for Money: Theory and Empirics," American Economic Review, 71(4), pp. 566-578.
  13. ^ • Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, 95(3), pp. 739-764.
       • Ben Bernanke and Mark Gertler, 1999. "Monetary Policy and Asset Price Volatility," Economic Review, Federal Reserve Bank of Kansas City, (4), pp. 17-51.
       • _____, 2001. "Should Central Banks Respond to Movements in Asset Prices?" American Economic Review, 91(2), pp. 253-257.
       • Frederic S. Mishkin, 2007. "Financial Instability and Monetary Policy," Risk USA Conference.
       • Claudio E.V. Borio and William R. White, 2003. "Whither Monetary and Financial Stability? The Implications of Evolving Policy Regimes," in Monetary Policy and Uncertainty: Adapting to a Changing Economy, pp. 131-211. Federal Reserve Bank of Kansas City.
       • Otmar Issing, 2003. "Monetary and Financial Stability: Is There a Trade-off?," Monetary Stability, Financial Stability and the Business Cycle, European Central Bank Conference.
       • Charles P. Kindleberger and Robert Z. Aliber, [1978] 2009. Manias, Panics, and Crashes: A History of Financial Crises, 6th edition. Palgrave. Description & TOC.
       • 2008:4. "Kenneth Rogoff Interview," The Region, Federal Reserve Bank of Minneapolis.
       • Lawrence Summers, 2007. "Beware Moral Hazard Fundamentalists," Financial Times, September 23.
       • William Poole, 2008. "How Important Is Moral Hazard?," Panel Discussion on Balancing Financial Stability, Price Stability and Macroeconomic Stability, U.S. Monetary Policy Forum.
       • Charles W. Calomiris, 2008. "banking crises," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
       • Lawrence H. Officer, 2008. "Topical Insight: Bailouts," The New Palgrave Dictionary of Economics Online.
       • Takeo Hoshi and Anil K. Kashyap, 2010. "Will the U.S. Bank Recapitalization Succeed? Eight Lessons from Japan," Journal of Financial Economics, 97(3), pp. 398-417. Abstract.
       • Robert J. Barro, 2009. "Rare Disasters, Asset Prices, and Welfare Costs," American Economic Review, 99(1), pp. 243-64.
  14. ^ Milton Friedman, [1987] 2008. "quantity theory of money." The New Palgrave Dictionary of Economics. 2nd Edition. Abstract. Arrow-page searchable preview at John Eatwell et al., 1989, Money: The New Palgrave, pp. 1-40.
  15. ^ • Bennett T. McCallum, 2008. "Monetarism," Concise Encyclopedia of Economics, 2nd ed.
       • Phillip Cagan, 1987. "monetarism," The New Palgrave: A Dictionary of Economics, v. 3, pp. 492–97. Table of Contents. Reprinted in John Eatwell et al., 1989), Money: The New Palgrave, pp. 195-205.
       • Jerome L. Stein, ed., 1976. Monetarism. Elsevier.
  16. ^ Benjamin M. Friedman, 2008. "money supply," The New Palgrave Dictionary of Economics, 2nd Edition. v. 5, pp. 745-51. Abstract.
       • Clark Warburton, 1966. Depression, Inflation, and Monetary Policy: Selected Papers, 1945-1953. Johns Hopkins Press. Evaluation in Anna J. Schwartz, Money in Historical Perspective, 1987.
       • Milton Friedman and Anna Jacobson Schwartz, 1963. A Monetary History of the United States, 1867-1960. Princeton. Page-searchable links to chapters on 1929-41 and 1948-60.
       • James Tobin, 1970. "Money and Income: Post Hoc Ergo Propter Hoc?" Quarterly Journal of Economics, 84(2), pp. 301-317.
       • Christopher A. Sims, 1972. "Money, Income, and Causality," American Economic Review, 62(4), pp. 540-552.
       • _____, 1980. "Comparison of Interwar and Postwar Business Cycles: Monetarism Reconsidered," American Economic Review, 70(2), pp. 250-257.
       • _____, 2011. "Statistical Modeling of Monetary Policy and its Effects", Nobel Prize lecture.
       • John P. Judd and John L. Scadding, 1982. "The Search for a Stable Money Demand Function: A Survey of the Post-1973 Literature," Journal of Economic Literature, 20(3), pp. 993-1023.
       • Christina D. Romer and David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz,", NBER Macroeconomics Annual 1989, 4, downloadable at ch. 3 and at Journal of Monetary Economics, 1994, 34(1), pp. 75-88. Abstract.
       • Dennis L. Hoffman, Robert H. Rasche, and Margie A. Tieslau, 1995. "The Stability of Long-run Money Demand in Five Industrial Countries," Journal of Monetary Economics, 35(2), pp. 317-339 Abstract.
       • Robert G. King and Charles I. Plosser, 1984. "Money, Credit, and Prices in a Real Business Cycle," American Economic Review, 74(3), pp. 363-380. Reprinted in Finn E. Kydland, ed., 1995. Business Cycle Theory, pp. 136-55.
       • Tack Yun, 1996. "Nominal Price Rigidity, Money Supply Endogeneity, and Business Cycles," Journal of Monetary Economics, 37{2}, pp. 345–70. Abstract.
       • Arturo Estrella and Frederic S. Mishkin, 1997. "Is There a Role for Monetary Aggregates in the Conduct of Monetary Policy?" Journal of Monetary Economics, 40(2), pp. 279-304. Abstract.
  17. ^ • Robert Mundell, 1963. "Inflation and Real Interest," Journal of Political Economy, 71(3), pp. pp. 280-283. Briefer description.
       • Burton G. Malkiel, [1987] 2008. "term structure of interest rates," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
       • Michael W. Brandt and David A. Chapman, 2008. "affine term structure models," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
       • William Poole, 2005. "Understanding the Term Structure of Interest Rates," speech, New York, Money Marketeers, The Down Town Association.
       • Bennett T. McCallum, 2005. "Monetary Policy and the Term Structure of Interest Rates," Economic Quarterly, 91(4), pp. 1-21. Federal Reserve Bank of Richmond.
       • Kenneth N. Kuttner, 2001. "Monetary Policy Surprises and Interest Rates: Evidence from the Fed Funds Futures Market," Journal of Monetary Economics, 47(3), pp. 523-544. Abstract.
       • 2004. Interest Rates and Monetary Policy. Conference, Federal Reserve Bank of San Francisco and Stanford Institute for Economic Policy Research. Summary and session links.
  18. ^ • Michael D. Bordo, 2008. "monetary policy, history of," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract and pre-publication copy.
       • John Kenneth Galbraith, 1975. Money: Whence it Came, Where it Went, Houghton Mifflin. ISBN 0-7351-0070-5} Extracts and review extracts.[2][3]
       • Gauti B. Eggertsson, 2008. "liquidity trap," .The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
       • Athanasios Orphanides, 2004. "Monetary Policy in Deflation: The Liquidity Trap in History and Practice," North American Journal of Economics and Finance, 15(1), pp. 101-124. Abstract.
       • Ben S. Bernanke, 2000, "Japanese Monetary Policy: A Case of Self-Induced Paralysis?" ch. 7, pp. 149-66 in Japan's Financial Crisis and Its Parallels to US Experience, Adam S. Posen and Ryoichi Mikitani, ed.
       • _____, 2003. "Some Thoughts on Monetary Policy in Japan," May 31, (speech) Federal Reserve Board.
       • _____, 2005. Essays on the Great Depression, ch. 1-4. Princeton. Description, TOC, and ch. 1, " The Macroeconomics of the Great Depression," preview.
       • Satyajit Chatterjee and P. Dean Corbae, 2008. "Great Depression, monetary and financial forces in," The New Palgrave Dictionary of Economics , 2nd Edition. Abstract.
       • G.J. Santoni, 1987. "The Great Bull Markets 1924-29 and 1982-87: Speculative Bubbles or Economic Fundamentals?" Federal Reserve Bank of St. Louis Review, November, pp. 16-30.
       • Richard C. Koo, 2008. The Holy Grail of Macro Economics: Lessons From Japan's Great Recession, Wiley. Description and Review.
       • Carmen M. Reinhart and Kenneth S. Rogoff, 2009. This Time Is Different: Eight Centuries of Financial Folly. Princeton University Press. Description, ch. 1 ("Varieties of Crises and their Dates," pp. 3-20), and chapter-preview links.
       • Kevin H. O'Rourke and Barry Eichengreen, 2009. "A Tale of Two Depressions," pp. 1-8.
       • John Quiggin, 2010. Zombie Economics: How Dead Ideas Still Walk among Us, ch. 2-3 & 5. Princeton U.P. Description, Archived 2010-06-25 at the Wayback Machine. TOC, and Introduction.
       • Christopher L. Foote and Paul S. Willen, 2011. "subprime mortgage crisis, the," The New Palgrave Dictionary of Economics, Online Edition. Abstract.
       • Thomas J. Sargent, 2011. "United States Then, Europe Now," Nobel lecture, sect. 7, Lessons for Now.
       • Roger Lowenstein, 2012. "The Villain," (front-cover title: "The Hero"), The Atlantic, 309(2), April, pp. 48-60. [Bernanke, other economists, and politicians on U.S. monetary policy since 2006.]
  19. ^ • Karl Brunner and Allan H. Meltzer, 1988. "Money and Credit in the Monetary Transmission Process," American Economic Review, 78(2), pp. 446-451.
       • Ben S. Bernanke and Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, 9(4),1995 pp. 27-48.
       • Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," Banque de France Bulletin Digest, No. 27, pp. 33-44.
       • Ben S. Bernanke and Vincent R. Reinhart, 2004. "Conducting Monetary Policy at Very Low Short-Term Interest Rates," American Economic Review, 94(2), pp. 85-90.
       • Peter N. Ireland, 2008. "monetary transmission mechanism," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. Pre-publication copy.
       • Alan S. Blinder et al., 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, 46(4), pp. 910–945 Pre-publication copy.
       • Vasco Cúrdia and Michael Woodford, 2011, "The Central-Bank Balance Sheet as an Instrument of Monetary Policy," Journal of Monetary Economics, 58(1), pp. 54-79. Abstract.
       • Xavier Freixas, 2009. "Monetary Policy in a Systemic Crisis," Oxford Review of Economic Policy, 25(4), pp. 630-53. Abstract.
  20. ^ • From The New Palgrave Dictionary of Economics, 2008. 2nd Edition:
             "monetary and fiscal policy overview" by Narayana R. Kocherlakota. Abstract.
             "fiscal and monetary policies in developing countries" by David Fielding. Abstract.
             "government budget constraint" by Eric M. Leeper and James M. Nason. Abstract.
             "currency crises" by Graciela Laura Kaminsky. Abstract.
             "currency crises models" by Craig Burnside, Martin Eichenbaum, and Sergio Rebelo. Abstract.
       • Stanley Fischer and William Easterly, 1990. "The Economics of the Government Budget Constraint," World Bank Research Observer, 5(2), pp. p. 127-142 (PDF, pp. 5-20 of 101).
       • Thomas J. Sargent and Neil Wallace, 1981. "Some Unpleasant Monetarist Arithmetic," Federal Reserve Bank of Minneapolis Quarterly Review, 5(3), pp. 1-17.
       • Thomas J. Sargent, 2011. "United States Then, Europe Now," Nobel lecture, sect. 7, Lessons for Now.
       • Milton Friedman, 1948. "A Monetary and Fiscal Framework for Economic Stability," American Economic Review, 38(3), pp. 245-264.
       • _____, 1959. A Program for Monetary Stability. Fordham University Press. New York. TOC chapter-preview links.
       • Michael Woodford, 2001. "Fiscal Requirements for Price Stability," Journal of Money, Credit and Banking, 33(3), pp. 669-728.
       • Alberto Alesina and Allan Drazen, 1991. "Why Are Stabilizations Delayed?" American Economic Review, 81(5) , pp. 1170-1188.
       • Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures." American Economic Review,, 90(2), pp. 1-16. Reprinted in M. Chatterji and P. Gangopadhyay, ed., 2005, Economic Globalization in Asia, pp. 47-63.
       • Graciela L. Kaminsky and Carmen M. Reinhart, 1999. "The Twin Crises: The Causes of Banking and Balance-Of-Payments Problems," American Economic Review, 89(3), pp. 473-500.
       • Christopher Adam and David Vines, 2009. "Remaking Macroeconomic Policy after the Global Financial Crisis: A Balance-Sheet Approach," Oxford Review of Economic Policy, 25(4), pp. 507-552. Abstract.
  21. ^ • Don Patinkin, 1987. "neutrality of money," The New Palgrave: A Dictionary of Economics, v. 3, pp. 639–44. Reprinted in John Eatwell et al., 1989, Money: The New Palgrave, pp. 273- 287.
       • Irving Fisher, 1928. The Money Illusion. Chapter-preview links.
       • William H. Branson and Alvin K. Klevorick, 1969. "Money Illusion and the Aggregate Consumption Function," American Economic Review, 59(5), pp. 832-849.
       • Eldar Shafir, Peter Diamond, and Amos Tversky, 1997. "Money Illusion," Quarterly Journal of Economics, 112(2), pp. 341-374.
       • Bruno, Michael, and William Easterly, 1998. "Inflation Crises and Long-run Growth," Journal of Monetary Economics 41(1), pp. 3–26. Abstract.
  22. ^ • Milton Friedman, [1987] 2008. "quantity theory of money." sect. 4, The Theory of Rational Expectations, The New Palgrave Dictionary of Economics. 2nd Edition. Earlier at John Eatwell et al., 1989), Money: The New Palgrave, pp. 26-28.
       • From The New Palgrave Dictionary of Economics, 2008. 2nd Edition:
             "rational expectations" by Thomas J. Sargent. Abstract.
             "inflation expectations" by Bennett T. McCallum. Abstract.
             "inflation targeting" by Lars E.O. Svensson. Abstract and pre-publication copy.
       • Thomas J. Sargent and Neil Wallace, 1975. "'Rational' Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, 83(2), pp. 241-254.
       • Thomas J. Sargent, 1976. "A Classical Macroeconometric Model for the United States," Journal of Political Economy, 84(2), pp. 207-238. Reprinted in Lucas and Sargent, ed., 1981, Rational Expectations and Econometric Practice, University of Minnesota Press, 1981. v. 2, pp. 521-51.
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       • _____, 1976. "Econometric Policy Evaluation: A Critique," Carnegie-Rochester Conference Series on Public Policy, 1(1), pp. 19–46.
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  23. ^ • From 2008, The New Palgrave Dictionary of Economics, 2nd Edition:
           "monetary business cycles (imperfect information)" by Christian Hellwig. Abstract.
          "bubbles" by Markus K. Brunnermeier.
          "speculative bubbles" by Miguel A. Iraola and Manuel S. Santos. Abstract.
           "information cascades," by Sushil Bikhchandani, David Hirshleifer and Ivo Welch. Abstract.
       • Alex Cukierman and Allan H. Meltzer, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, 54(5), pp. 1099-1128.
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       • Frederic S. Mishkin, 1991. "Asymmetric Information and Financial Crises: A Historical Perspective," in R. Glenn Hubbard, ed., Financial Markets and Financial Crises (description), Chicago, pp. 69-108
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       • Laura E. Kodres and Matthew Pritsker, 2002. "A Rational Expectations Model of Financial Contagion," Journal of Finance, 57(2), pp. 769-799.
  24. ^ • Paul Povel, Rajdeep Singh, and Andrew Winton, 2007. "Booms, Busts, and Fraud," Review of Financial Studies, 20(4), pp. 1219-1254.
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  25. ^ Martin Shubik, 1990. "A Game Theoretic Approach to the Theory of Money and Financial Institutions," ch. 5, in B. M. Friedman and & F. H. Hahn, ed. Handbook of Monetary Economics, Elsevier, v. 1, pp. 171-219.
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          v. 2. Description and contents.
          v. 3: Description.
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       • Centre for Economic Policy Research, London:
             Mathias Dewatripont, Xavier Freixas, and Richard Portes, ed., 2009. Macroeconomic Stability and Financial Regulation.
             Thorsten Beck, Diane Coyle, Mathias Dewatripont, Xavier Freixas, and Paul Seabright, 2010. Bailing out the Banks: Reconciling Stability and Competition, ch. 7, "Preventing Future Crises: Reforming Prudential Regulation," pp. 67-83.
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       • Randall S. Kroszner and Philip E. Strahan, 1999. "What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions," Quarterly Journal of Economics, 114(4), pp. 1437-1467.fragility of financial markets,
       • Ben Bernanke and Mark Gertler, 1990. "Financial Fragility and Economic Performance," Quarterly Journal of Economics, 105(1), pp. 87-114.
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       • Ross Levine, Norman Loayza, and Thorsten Beck, 2000. "Financial Intermediation and Growth: Causality and Causes," Journal of Monetary Economics, 46, pp. 31-77 (close Pages tab at left).
       • Asli Demirgüç-Kunt and Enrica Detragiache, 2002. "Does Deposit Insurance Increase Banking System Stability? An Empirical Investigation," Journal of Monetary Economics, 49(7), pp. 1373-1406. Abstract & TOC.
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       • Thorsten Beck, Aslı Demirgu¨ Kunt, and Ross Levine 2006. "Bank Supervision and Corruption in Lending," Journal of Monetary Economics, 53(8), pp. 2131–2163. Abstract.
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             Thorsten Beck, Asli Demirguc-Kunt, and Ross Levine. "Bank Concentration and Fragility: Impact and Mechanics," ch. 5, pp. 193- 231. Abstract.
             Franklin Allen and Douglas Gale. "Systemic Risk and Regulation," ch. 7. pp. 341-368.
       • Carl E. Walsh, 2009. "Using Monetary Policy to Stabilize Economic Activity," in Financial Stability and Macroeconomic Policy, FRBKC, Aug., pp. 245-96.
       • Ben S. Bernanke, 2010. "Monetary Policy and the Housing Bubble," American Economic Association meeting. Atlanta. January 3.
       • Frontline, 2009. "The Warning," PBS, October 20. Brooksley Born's efforts as CFTC chair (1996-1999) to regulate OTC derivatives. Transcript and arrow-link to broadcast.
       • Charlie Rose, 2011. Paul Volcker interview, Oct 24, PBS. On current financial regulatory reform in the U.S., Europe, and Japan. Click on picture to play.
  27. ^ • From The New Palgrave Dictionary of Economics, 2008. 2nd Edition:
             "monetary policy, history of" by Michael D. Bordo. Abstract and pre-publication copy.
             "Taylor rules," v. 8, pp. 200-04, by Athanasios Orphanides. Abstract.
             "time consistency of monetary and fiscal policy," by Paul Klein. Abstract.
             "epistemic game theory: incomplete information" by Aviad Heifetz. Abstract.
       • Finn E. Kydland and Edward C. Prescott, 1977. "Rules Rather than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, 85(3), pp. 473–92.
       • Robert J. Barro and David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," Journal of Monetary Economics, 12(1), pp. 101–21.
       • John B. Taylor, 1993. "Discretion versus Policy Rules in Practice," Carnegie-Rochester Conference Series on Public Policy, 39, pp. 195-214.
       • Michael Woodford, 2003. Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton University Press. Description, table of contents, and chapter-1 ["The Return of Monetary Rules"] link. Reviews by Robert Formaini and Bennett T. McCallum.
  28. ^ • From Christina D. Romer and David H. Romer, 2007:2. "Monetary Economics," NBER Reporter, p. 1.
       • Alan S. Blinder, 1997. "What Central Bankers Could Learn from Academics — and Vice Versa," Journal of Economic Perspectives, 11(2), pp. 3-19.
  29. ^
  30. ^

General references[edit]

  • Handbook of Monetary Economics, Elsevier.
Friedman, Benjamin M., and Frank H. Hahn, ed. , 1990. v. 1 links for description & contents and chapter-outline previews
_____, 1990. v. 2 links for description & contents and chapter-outline previews.
Friedman, Benjamin, and Michael Woodford, 2010. v. 3A & 3B links for description & and chapter abstract & TOC.

External links[edit]

(JEL: E4) Money and Interest Rates
(JEL: E5) Monetary Policy, Central Banking, and the Supply of Money and Credit
Presentation of Money, credit and finance an slideshow
What is money? an slideshow