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Monetary Mechanics: A Financial View

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  • Eric Tymoigne

Abstract

This paper develops the framework of analysis of monetary systems put together by authors such as Macleod, Keynes, Innes, and Knapp. This framework does not focus on the functions performed by an object but rather on its financial characteristics. Anything issued by anybody can be a monetary instrument and any type of material can be used to make a monetary instrument, as these are unimportant determinants of what a monetary instrument is. What matters is the existence of specific financial characteristics. These characteristics lead to a stable nominal value (parity) in the proper financial environment. This framework of analysis leads the researcher to study how the fair value of a monetary instrument changes and how that change differs from changes in the value of the unit of account. It also provides a road map to understanding monetary history and why monetary instruments are held.

Suggested Citation

  • Eric Tymoigne, 2014. "Monetary Mechanics: A Financial View," Economics Working Paper Archive wp_799, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_799
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    References listed on IDEAS

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    1. Goldberg, Dror, 2005. "Famous Myths of "Fiat Money"," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 957-967, October.
    2. Cecchetti, Stephen G, 1988. "The Case of the Negative Nominal Interest Rates: New Estimates of the Term Structure of Interest Rates during the Great Depression," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1111-1141, December.
    3. John F. Henry, 2004. "The Social Origins of Money: The Case of Egypt," Chapters,in: Credit and State Theories of Money, chapter 4 Edward Elgar Publishing.
    4. Starr, Ross M, 1974. "The Price of Money in a Pure Exchange Monetary Economy with Taxation," Econometrica, Econometric Society, vol. 42(1), pages 45-54, January.
    5. L. Randall Wray, 1998. "Understanding Modern Money," Books, Edward Elgar Publishing, number 1668, September.
    6. Bruce D. Smith, 1985. "American Colonial Monetary Regimes: The Failure of the Quantity Theory and Some Evidence in Favour of an Alternative View," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 531-565, August.
    7. Menger, Carl, 1892. "On the Origins of Money," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 2, pages 239-255.
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    More about this item

    Keywords

    Monetary Instrument; Money; Fair Value; Unit of Account;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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