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Monetary Theory of Macro Accounting for Supply Chain Finance

Author

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  • Winschel, Viktor
  • Menendez, Renee

Abstract

We present a monetary theory where money is taken primarily as a medium of debt repayment and not as a medium of exchange. Money and products are exchanged in reciprocal contracts of disposals of property rights within two-sided obligation contracts. Money demand arises because production takes time and producers need to pay suppliers of resources before they are paid at markets for their products. Accordingly, money is part of monetary systems of macro accounting for supply chain finance where producers are exchanging their products for money in order to repay loans of investments. We take advantage of two legal principles of separation and abstraction in order to clarify the concepts of obligations, debts, claims, disposals, property rights or money. Monetary systems exist to organise the division of labour at the micro level of economies. At the meso level of banking money helps to organise the sharing of risks from investments. At the macro level monetary systems help to distribute the product of the common productive effort (GDP). We analyse macro (aka quadruple accounting) systems composed as parallel bookings in one or more micro (aka double) accounting systems of the agents exchanging products and money in networks of obligations created by contracts. We use the Bill of Exchange (BoE) as the financial instrument to unify views on paper, gold and fractional monetary systems and to understand how to book money creation at central banks. We propose to keep track of invariances of accounting systems over micro, meso and macro levels of economies by sheaf theory and homology theory to detect and resolve inconsistencies as the mathematical foundation of monetary policy. We discuss open games as an implementation technology for monetary macro accounting (MoMa) systems in reduced form (Markov) models and for the analysis of data for a structural analysis by models of belief formation or multi-agent systems. We also discuss industrial applications of our monetary theory.

Suggested Citation

  • Winschel, Viktor & Menendez, Renee, 2025. "Monetary Theory of Macro Accounting for Supply Chain Finance," MPRA Paper 123788, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:123788
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    References listed on IDEAS

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    1. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
    2. Michael McLeay & Amar Radia & Ryland Thomas, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
    3. Viktor Winschel & Markus Kr‰tzig, 2010. "Solving, Estimating, and Selecting Nonlinear Dynamic Models Without the Curse of Dimensionality," Econometrica, Econometric Society, vol. 78(2), pages 803-821, March.
    4. Hellwig, Martin F., 1993. "The challenge of monetary theory," European Economic Review, Elsevier, vol. 37(2-3), pages 215-242, April.
    5. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
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    Cited by:

    1. Ren'ee Men'endez & Viktor Winschel, 2025. "Macroeconomic Foundation of Monetary Accounting by Diagrams of Categorical Universals," Papers 2508.14132, arXiv.org.

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    Keywords

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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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