Research contribution
Wright, together with co-author Nobuhiro Kiyotaki, pioneered the use of search theory in monetary economics. The application of search theory to macroeconomics would later be known as matching theory. Search-theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential, which contrasts with earlier reduced form approaches to money in macroeconomics, such as putting money in the utility function or imposing cash-in-advance constraints. These earlier ways of modeling money's role did not show explicitly how it helps overcome informational, spatial, or temporal frictions. Search-theoretic models, on the other hand, are based on explicit descriptions of specialization, the pattern of meetings, and the information structure.
Kiyotaki and Wright (1989) was the first attempt to use a search-theoretic model to endogenously determine which commodities would become media of exchange, i.e. commodity money. Later, Kiyotaki and Wright (1991) constructed an alternative search-based model to prove that fiat money can be valued as a medium of exchange even if it has a rate of return that is inferior to other available assets. The application of these theories emerged in Kiyotaki and Wright (1993), when the authors developed a tractable model of the exchange process that captures the "double coincidence of wants problem" in a pure barter setup. In this model, the essential function of money is its role as a medium of exchange. The model can be used to address issues in monetary economics, such as the interaction between specialization and monetary exchange, and the possibility of equilibria with multiple fiat currencies.
A shortcoming of search-theoretic models of money is that these models becomes intractable without very strong assumptions, and are therefore impractical for the analysis of monetary policy. Wright and Ricardo Lagos (2005) attempt to overcome this shortcoming by proposing a more general, yet still tractable, framework for the analysis of monetary policy.
New Keynesian economics is a school of macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of new classical macroeconomics.
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, and it considers how money 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.
International finance is the branch of financial economics broadly concerned with monetary and macroeconomic interrelations between two or more countries. International finance examines the dynamics of the global financial system, international monetary systems, balance of payments, exchange rates, foreign direct investment, and how these topics relate to international trade.
The coincidence of wants is an economic phenomenon where two parties each hold an item the other wants, so they exchange these items directly without any monetary medium. This type of exchange is the foundation of a bartering economy. Double coincidence of wants means that both of the parties have to agree to sell and buy each commodity. Under this system, problems arise through the improbability of the wants, needs, or events that cause or motivate a transaction occurring at the same time and the same place. One example is the bar musician who is "paid" with liquor or food, items which his landlord will not accept as rent payment, when the musician would rather have a month's shelter. If, instead, the musician's landlord were to throw a party and desire music for it, hiring the musician to play it by offering the month's rent in exchange, a coincidence of wants would exist.
Olivier Jean Blanchard is a French economist and professor who is a senior fellow at the Peterson Institute for International Economics. He was the chief economist at the International Monetary Fund from September 1, 2008, to September 8, 2015. Blanchard was appointed to the position under the tenure of Dominique Strauss-Kahn; he was succeeded by Maurice Obstfeld. He also is a Robert M. Solow Professor of Economics emeritus at the Massachusetts Institute of Technology (MIT). He is one of the most cited economists in the world, according to IDEAS/RePEc.
Gottfried von Haberler was an Austrian-American economist. He worked in particular on international trade. One of his major contributions was reformulating the Ricardian idea of comparative advantage in a neoclassical framework, abandoning the labor theory of value for an opportunity cost concept.
Modern Monetary Theory or Modern Money Theory (MMT) is a heterodox macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires. MMT is opposed to the mainstream understanding of macroeconomic theory, and has been criticized by many mainstream economists.
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main functions of money are distinguished as: a medium of exchange, a unit of account, a store of value and sometimes, a standard of deferred payment. Any item or verifiable record that fulfils these functions can be considered as money.
Metallism is the economic principle that the value of money derives from the purchasing power of the commodity upon which it is based. The currency in a metallist monetary system may be made from the commodity itself or it may use tokens redeemable in that commodity. Georg Friedrich Knapp (1842–1926) coined the term "metallism" to describe monetary systems using coin minted in silver, gold or other metals.
Nobuhiro Kiyotaki FBA is a Japanese economist and the Harold H. Helms '20 Professor of Economics and Banking at Princeton University. He is especially known for proposing several models that provide deeper microeconomic foundations for macroeconomics, some of which play a prominent role in New Keynesian macroeconomics.
Jordi Galí is a Spanish macroeconomist who is regarded as one of the main figures in New Keynesian macroeconomics today. He is currently the director of the Centre de Recerca en Economia Internacional at Universitat Pompeu Fabra and a Research Professor at the Barcelona Graduate School of Economics. After obtaining his doctorate from MIT in 1989 under the supervision of Olivier Blanchard, he held faculty positions at Columbia University and New York University before moving to Barcelona.
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Shouyong Shi is a Canadian economist and member of the Pennsylvania State University faculty. He is a tier 1 Canada Research Chair as well as a Research Fellow at the Bank of Canada.
In economics, matching theory, also known as search and matching theory, is a mathematical framework attempting to describe the formation of mutually beneficial relationships over time.
Fiat money is a type of money that is not backed by any commodity such as gold or silver, and typically declared by a decree from the government to be legal tender. Throughout history, fiat money was sometimes issued by local banks and other institutions. In modern times, fiat money is generally established by government regulation.
Robert Wayne Clower was an American economist. He is credited with having largely created the field of stock-flow analysis in economics and with seminal works on the microfoundations of monetary theory and macroeconomics.
In macroeconomics, the welfare cost of inflation comprises the changes in social welfare caused by inflation.
William Francis Mitchell is a professor of economics at the University of Newcastle, New South Wales, Australia and Docent Professor of Global Political Economy at the University of Helsinki, Finland. He is one of the founding developers of Modern Monetary Theory.
Larry Randall Wray is a professor of Economics at Bard College and Senior Scholar at the Levy Economics Institute. Previously, he was a professor at the University of Missouri–Kansas City in Kansas City, Missouri, USA, whose faculty he joined in August 1999, and a professor at the University of Denver, where he served from 1987 to 1999. He has served as a visiting professor at the University of Rome, Italy, the University of Paris, France, and the UNAM, in Mexico City. From 1994 to 1995 he was a Fulbright Scholar at the University of Bologna. From 2015 he is a Visiting professor at the University of Bergamo.
In macroeconomics, chartalism is a theory of money that argues that money originated historically with states' attempts to direct economic activity rather than as a spontaneous solution to the problems with barter or as a means with which to tokenize debt, and that fiat currency has value in exchange because of sovereign power to levy taxes on economic activity payable in the currency they issue.
