Unit 63 international monetary economics

Monetary economics is a branch of economics that historically prefigured and remains integrally linked to macroeconomics.[1] Monetary economics 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.[2] It examines the effects of monetary systems, including regulation of money and associated financial institutions[3] and international aspects.[4]

Modern analysis has attempted to provide a micro-based formulation of 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]

Research areas have included:

empirical determinants and measurement of the money supply, whether narrowly-, broadly-, or index-aggregated, in relation to economic activity[9]

debt-deflation and balance-sheet theories, which hypothesize that over-extension of credit associated with a subsequent asset-price fall generate business fluctuations through the wealth effect on net worth.[10] and the relationship between the demand for output and the demand for money[11]

monetary implications of the asset-price/macroeconomic relation[12]

the importance and stability of the relation between the money supply and interest rates, the price level, and nominal and real output of an economy.[13]

monetary impacts on interest rates and the term structure of interest rates[14]

lessons of monetary/financial history[15]

transmission mechanisms of monetary policy as to the macroeconomy[16]

the monetary/fiscal policy relationship to macroeconomic stability[17]

neutrality of money vs. money illusion as to a change in the money supply, price level, or inflation on output[18]

tests and testability of rational-expectations theory as to changes in output or inflation from monetary policy[19]

monetary implications of imperfect and asymmetric information[20] and fraudulent finance[21]

game theory as a modeling paradigm for monetary and financial institutions[22]

the political economy of financial regulation and monetary policy[23]

possible advantages of following a monetary-policy rule to avoid inefficiencies of time inconsistency from discretionary policy[24]

"anything that central bankers should be interested in."[25]