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Monetary economics is the branch of economics that studies the different competing theories of money: it provides a framework for analyzing money and considers its functions (such as medium of exchange, store of value and unit of account), and it considers how money, for example fiat currency, can gain acceptance purely because of its convenience as a public good.The discipline has historically prefigured, and remains integrally linked to, macroeconomics. This branch also examines the effects of monetary systems, including regulation of money and associated financial institutions and international aspects.
Modern analysis has attempted to provide microfoundations for the demand for moneyand to distinguish valid nominal and real monetary relationships for micro or macro uses, including their influence on the aggregate demand for output. Its methods include deriving and testing the implications of money as a substitute for other assets and as based on explicit frictions.
Traditionally, research areas in monetary economics have included:
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At around the same time in the medieval Islamic world, a vigorous monetary economy was created during the 7th–12th centuries on the basis of the expanding levels of circulation of a stable high-value currency (the dinar). Innovations introduced by Muslim economists, traders and merchants include the earliest uses of credit,cheques, promissory notes, savings accounts, transactional accounts, loaning, trusts, exchange rates, the transfer of credit and debt, and banking institutions for loans and deposits.
In the Indian subcontinent, Sher Shah Suri (1540–1545), introduced a silver coin called a rupiya, weighing 178 grams. Its used was continued by the Mughal rulers.The history of the rupee traces back to Ancient India circa 3rd century BC. Ancient India was one of the earliest issuers of coins in the world, along with the Lydian staters, several other Middle Eastern coinages and the Chinese wen. The term is from rūpya, a Sanskrit term for silver coin, from Sanskrit rūpa, beautiful form.
The imperial taka was officially introduced by the monetary reforms of Muhammad bin Tughluq, the emperor of the Delhi Sultanate, in 1329. It was modeled as representative money, a concept pioneered as paper money by the Mongols in China and Persia. The tanka was minted in copper and brass. Its value was exchanged with gold and silver reserves in the imperial treasury. The currency was introduced due to the shortage of metals.
Both the Kabuli rupee and the Kandahari rupee were used as currency in Afghanistan prior to 1891, when they were standardized as the Afghan rupee. The Afghan rupee, which was subdivided into 60 paisas, was replaced by the Afghan afghani in 1925.
Until the middle of the 20th century, Tibet's official currency was also known as the Tibetan rupee.
Serious interest in the concepts behind money occurred during the dramatic period of inflation in the late 15th to early 17th centuries 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.[ citation needed ]
At the end of this period, the first modern texts on monetary economics were beginning to appear.
During the eighteenth century, the concept of banknotes became more common in Europe. David Hume referred to it as "this new invention of paper".
In 1705, John Law in Scotland published Money and Trade Considered , which examined the failure of metal-based money during the previous hundred and fifty years. He proposed replacing that system with a land bank system of paper money based on the value of real estate. He succeeded in getting this proposal implemented. However, his bank failed due to a bubble of speculation collapsing into extreme inflation; perhaps because he failed to take the lessons of the Spanish Price Revolution seriously.[ citation needed ]
In 1720, Isaac Gervaise wrote The System or Theory of the Trade of the World . He criticised mercantilism and state-supported credit for the inflation problems of his era.[ citation needed ]
Della Moneta , was published by Ferdinando Galiani in 1751, and is arguably the first modern text on economic theory. It was printed twenty-five years before Adam Smith's more famous book, The Wealth of Nations , which touched on some of the same topics. Della Moneta covered many modern monetary concepts, including the value, origin, and regulation of money. It carefully examined the possible causes for money's value to fluctuate.
The year following, 1752, Of the Balance of Trade was published by Hume. He argued 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.
[Bernanke, other economists, and politicians on U.S. monetary policy since 2006.
Sher Shah issued a coin of silver which was termed the Rupiya. This weighed 178 grains and was the precursor of the modern rupee. It remained largely unchanged till the early 20th Century
rū'pya 10805 rū'pya 'beautiful, bearing a stamp' ; 'silver'
rūpa 10803 'form, beauty'
... The currency in general use was what was known at the Tibetan rupee ...Cite journal requires
Monetarism is a school of thought in monetary economics that emphasizes the role of governments in controlling the amount of money in circulation. Monetarist theory asserts that variations in the money supply have major influences on national output in the short run and on price levels over longer periods. Monetarists assert that the objectives of monetary policy are best met by targeting the growth rate of the money supply rather than by engaging in discretionary monetary policy.
Political economy is the study of production and trade and their relations with law, custom and government; and with the distribution of national income and wealth. As a discipline, political economy originated in moral philosophy, in the 18th century, to explore the administration of states' wealth, with "political" signifying the Greek word polity and "economy" signifying the Greek word "okonomie". The earliest works of political economy are usually attributed to the British scholars Adam Smith, Thomas Malthus, and David Ricardo, although they were preceded by the work of the French physiocrats, such as François Quesnay (1694–1774) and Anne-Robert-Jacques Turgot (1727–1781).
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Managerial economics deals with the application of the economic concepts, theories, tools, and methodologies to solve practical problems in a business. In other words, managerial economics is the combination of economics theory and managerial theory. It helps the manager in decision-making and acts as a link between practice and theory. It is sometimes referred to as business economics and is a branch of economics that applies microeconomic analysis to decision methods of businesses or other management units.
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Thomas John Sargent is an American economist, who is the W.R. Berkley Professor of Economics and Business at New York University. He specializes in the fields of macroeconomics, monetary economics and time series econometrics. As of 2014, he ranks fourteenth among the most cited economists in the world. He was awarded the Nobel Memorial Prize in Economics in 2011 together with Christopher A. Sims for their "empirical research on cause and effect in the macroeconomy".
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Eliot Roy Weintraub is an American mathematician, economist, and, since 1976, professor of economics at Duke University. He was born in 1943 in New York City.
Economic methodology is the study of methods, especially the scientific method, in relation to economics, including principles underlying economic reasoning. In contemporary English, 'methodology' may reference theoretical or systematic aspects of a method. Philosophy and economics also takes up methodology at the intersection of the two subjects.
David Ernest William Laidler is an economist who has been one of the foremost scholars of monetarism. He published major economics journal articles on the topic in the late 1960s and early 1970s. His book, The Demand for Money, was published in four editions from 1969 through 1993, initially setting forth the stability of the relationship between income and the demand for money and later taking into consideration the effects of legal, technological, and institutional changes on the demand for money. The book has been translated into French, Spanish, Italian, Japanese, and Chinese.
Justice in economics is a subcategory of welfare economics with models frequently representing the ethical-social requirements of a given theory, whether "in the large", as of a just social order, or "in the small", as in the equity of "how institutions distribute specific benefits and burdens". That theory may or may not elicit acceptance. In the Journal of Economic Literature classification codes 'justice' is scrolled to at JEL: D63, wedged on the same line between 'Equity' and 'Inequality' along with 'Other Normative Criteria and Measurement'. Categories above and below the line are Externalities and Altruism.
Agent-based computational economics (ACE) is the area of computational economics that studies economic processes, including whole economies, as dynamic systems of interacting agents. As such, it falls in the paradigm of complex adaptive systems. In corresponding agent-based models, the "agents" are "computational objects modeled as interacting according to rules" over space and time, not real people. The rules are formulated to model behavior and social interactions based on incentives and information. Such rules could also be the result of optimization, realized through use of AI methods.
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Rural economics is the study of rural economies, including:
Macroeconomic theory has its origins in the study of business cycles and monetary theory. In general, early theorists believed monetary factors could not affect real factors such as real output. John Maynard Keynes attacked some of these "classical" theories and produced a general theory that described the whole economy in terms of aggregates rather than individual, microeconomic parts. Attempting to explain unemployment and recessions, he noticed the tendency for people and businesses to hoard cash and avoid investment during a recession. He argued that this invalidated the assumptions of classical economists who thought that markets always clear, leaving no surplus of goods and no willing labor left idle.
Neil Wallace is an American economist and professor at Pennsylvania State University. Wallace is considered one of the main proponents of new classical macroeconomics.
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