Monetary Economics

Monetary Economics is a branch of applied macroeconomics that analyzes the role of money, credit, and financial institutions in an economy. It is primarily concerned with the formulation and effects of monetary policy—the actions undertaken by a central bank to manage the money supply and interest rates—in order to achieve macroeconomic objectives such as price stability, maximum employment, and stable economic growth. This field examines how monetary variables influence aggregate outcomes like inflation, output, and consumption, and explores the mechanisms through which policy decisions are transmitted throughout the financial system and the broader economy.

  1. Foundations of Money and the Financial System
    1. The Nature and Functions of Money
      1. Defining Money
        1. Economic Definition of Money
          1. Characteristics of Money
            1. Durability
              1. Portability
                1. Divisibility
                  1. Uniformity
                    1. Limited Supply
                      1. Acceptability
                      2. Distinction from Wealth
                        1. Distinction from Income
                          1. Distinction from Credit
                          2. Functions of Money
                            1. Medium of Exchange
                              1. Overcoming Barter Limitations
                                1. Double Coincidence of Wants Problem
                                  1. Transaction Costs Reduction
                                    1. Criteria for Effective Medium of Exchange
                                    2. Unit of Account
                                      1. Role in Price Quotation
                                        1. Measurement of Value
                                          1. Standard of Deferred Payment
                                            1. Accounting and Record Keeping
                                            2. Store of Value
                                              1. Purchasing Power Preservation
                                                1. Inflation and Store of Value
                                                  1. Comparison with Other Assets
                                                    1. Liquidity Premium
                                                  2. Evolution of the Payments System
                                                    1. Commodity Money
                                                      1. Gold Standard
                                                        1. Silver Standard
                                                          1. Other Commodity Standards
                                                            1. Historical Examples
                                                              1. Limitations of Commodity Money
                                                              2. Representative Money
                                                                1. Gold-Backed Currency
                                                                  1. Convertibility Mechanisms
                                                                  2. Fiat Money
                                                                    1. Emergence and Rationale
                                                                      1. Government Backing
                                                                        1. Advantages and Disadvantages
                                                                        2. Checks
                                                                          1. Development and Usage
                                                                            1. Clearing and Settlement Systems
                                                                              1. Advantages and Disadvantages
                                                                              2. Electronic Payments and E-Money
                                                                                1. Credit Cards
                                                                                  1. Debit Cards
                                                                                    1. Automated Clearing House (ACH)
                                                                                      1. Wire Transfers
                                                                                        1. Online Payment Systems
                                                                                          1. Mobile Payments
                                                                                            1. Stored Value Cards
                                                                                            2. Cryptocurrencies and Digital Currencies
                                                                                              1. Blockchain Technology
                                                                                                1. Bitcoin and Altcoins
                                                                                                  1. Central Bank Digital Currencies (CBDCs)
                                                                                                    1. Stablecoins
                                                                                                      1. Regulatory and Adoption Issues
                                                                                                        1. Environmental Concerns
                                                                                                    2. Measuring the Money Supply
                                                                                                      1. Monetary Aggregates
                                                                                                        1. M0 (Monetary Base)
                                                                                                          1. Currency in Circulation
                                                                                                            1. Bank Reserves
                                                                                                            2. M1
                                                                                                              1. Currency in Circulation
                                                                                                                1. Demand Deposits
                                                                                                                  1. Other Checkable Deposits
                                                                                                                    1. Traveler's Checks
                                                                                                                      1. Liquidity of M1
                                                                                                                      2. M2
                                                                                                                        1. M1 Components
                                                                                                                          1. Savings Deposits
                                                                                                                            1. Small Time Deposits
                                                                                                                              1. Money Market Deposit Accounts
                                                                                                                                1. Money Market Mutual Fund Shares
                                                                                                                                  1. Relationship to M1
                                                                                                                                  2. M3 and Broader Measures
                                                                                                                                    1. M2 Components
                                                                                                                                      1. Large Time Deposits
                                                                                                                                        1. Institutional Money Market Funds
                                                                                                                                          1. Repurchase Agreements
                                                                                                                                            1. Eurodollars
                                                                                                                                              1. International Differences in Definitions
                                                                                                                                            2. The Role of Financial Innovation in Measurement
                                                                                                                                              1. Impact of New Financial Products
                                                                                                                                                1. Near-Money Assets
                                                                                                                                                  1. Shadow Banking and Money Supply
                                                                                                                                                    1. Challenges in Defining Money
                                                                                                                                                      1. Velocity Changes Due to Innovation
                                                                                                                                                    2. Financial Markets and Instruments
                                                                                                                                                      1. Function of Financial Markets
                                                                                                                                                        1. Allocation of Resources
                                                                                                                                                          1. Capital Allocation Efficiency
                                                                                                                                                            1. Channeling Savings to Investment
                                                                                                                                                            2. Price Discovery
                                                                                                                                                              1. Information Aggregation
                                                                                                                                                                1. Market Efficiency
                                                                                                                                                                2. Risk Sharing
                                                                                                                                                                  1. Risk Distribution
                                                                                                                                                                    1. Diversification Benefits
                                                                                                                                                                    2. Liquidity Provision
                                                                                                                                                                      1. Market Making
                                                                                                                                                                        1. Secondary Market Trading
                                                                                                                                                                      2. Structure of Financial Markets
                                                                                                                                                                        1. Debt and Equity Markets
                                                                                                                                                                          1. Characteristics of Debt Instruments
                                                                                                                                                                            1. Fixed Income Securities
                                                                                                                                                                              1. Maturity Dates
                                                                                                                                                                                1. Interest Payments
                                                                                                                                                                                2. Characteristics of Equity Instruments
                                                                                                                                                                                  1. Ownership Rights
                                                                                                                                                                                    1. Dividend Payments
                                                                                                                                                                                      1. Voting Rights
                                                                                                                                                                                    2. Primary and Secondary Markets
                                                                                                                                                                                      1. Initial Issuance of Securities
                                                                                                                                                                                        1. IPOs and New Issues
                                                                                                                                                                                          1. Underwriting Process
                                                                                                                                                                                          2. Trading of Existing Securities
                                                                                                                                                                                            1. Market Liquidity
                                                                                                                                                                                              1. Price Formation
                                                                                                                                                                                            2. Exchanges and Over-the-Counter (OTC) Markets
                                                                                                                                                                                              1. Organized Exchanges
                                                                                                                                                                                                1. Centralized Trading
                                                                                                                                                                                                  1. Standardized Contracts
                                                                                                                                                                                                    1. Clearing and Settlement
                                                                                                                                                                                                    2. OTC Market Features
                                                                                                                                                                                                      1. Dealer Networks
                                                                                                                                                                                                        1. Customized Contracts
                                                                                                                                                                                                          1. Counterparty Risk
                                                                                                                                                                                                        2. Money and Capital Markets
                                                                                                                                                                                                          1. Short-Term vs. Long-Term Instruments
                                                                                                                                                                                                            1. Examples of Money Market Instruments
                                                                                                                                                                                                              1. Examples of Capital Market Instruments
                                                                                                                                                                                                                1. Yield Curve Relationships
                                                                                                                                                                                                              2. Key Financial Instruments
                                                                                                                                                                                                                1. Money Market Instruments
                                                                                                                                                                                                                  1. Treasury Bills
                                                                                                                                                                                                                    1. Auction Process
                                                                                                                                                                                                                      1. Discount Pricing
                                                                                                                                                                                                                        1. Risk Characteristics
                                                                                                                                                                                                                        2. Commercial Paper
                                                                                                                                                                                                                          1. Corporate Short-Term Debt
                                                                                                                                                                                                                            1. Credit Ratings
                                                                                                                                                                                                                              1. Backup Lines of Credit
                                                                                                                                                                                                                              2. Certificates of Deposit
                                                                                                                                                                                                                                1. Negotiable CDs
                                                                                                                                                                                                                                  1. Interest Rate Risk
                                                                                                                                                                                                                                  2. Repurchase Agreements
                                                                                                                                                                                                                                    1. Repo Market Structure
                                                                                                                                                                                                                                      1. Collateral Requirements
                                                                                                                                                                                                                                      2. Federal Funds
                                                                                                                                                                                                                                        1. Interbank Lending
                                                                                                                                                                                                                                          1. Federal Funds Rate
                                                                                                                                                                                                                                          2. Banker's Acceptances
                                                                                                                                                                                                                                            1. Trade Finance
                                                                                                                                                                                                                                              1. Credit Enhancement
                                                                                                                                                                                                                                            2. Capital Market Instruments
                                                                                                                                                                                                                                              1. Government Bonds
                                                                                                                                                                                                                                                1. Treasury Securities
                                                                                                                                                                                                                                                  1. Municipal Bonds
                                                                                                                                                                                                                                                    1. Agency Securities
                                                                                                                                                                                                                                                    2. Corporate Bonds
                                                                                                                                                                                                                                                      1. Investment Grade vs. High Yield
                                                                                                                                                                                                                                                        1. Bond Ratings
                                                                                                                                                                                                                                                          1. Covenant Provisions
                                                                                                                                                                                                                                                          2. Stocks
                                                                                                                                                                                                                                                            1. Common Stock
                                                                                                                                                                                                                                                              1. Preferred Stock
                                                                                                                                                                                                                                                                1. Market Capitalization
                                                                                                                                                                                                                                                                2. Mortgages
                                                                                                                                                                                                                                                                  1. Residential Mortgages
                                                                                                                                                                                                                                                                    1. Commercial Mortgages
                                                                                                                                                                                                                                                                      1. Mortgage-Backed Securities
                                                                                                                                                                                                                                                                3. Financial Institutions
                                                                                                                                                                                                                                                                  1. Role of Financial Intermediaries
                                                                                                                                                                                                                                                                    1. Risk Transformation
                                                                                                                                                                                                                                                                      1. Credit Risk Assessment
                                                                                                                                                                                                                                                                        1. Portfolio Diversification
                                                                                                                                                                                                                                                                          1. Risk Pooling
                                                                                                                                                                                                                                                                          2. Maturity Transformation
                                                                                                                                                                                                                                                                            1. Asset-Liability Matching
                                                                                                                                                                                                                                                                              1. Liquidity Management
                                                                                                                                                                                                                                                                              2. Information Processing
                                                                                                                                                                                                                                                                                1. Screening and Monitoring
                                                                                                                                                                                                                                                                                  1. Reducing Information Asymmetries
                                                                                                                                                                                                                                                                                  2. Transaction Cost Reduction
                                                                                                                                                                                                                                                                                    1. Economies of Scale
                                                                                                                                                                                                                                                                                      1. Specialized Expertise
                                                                                                                                                                                                                                                                                    2. Types of Financial Institutions
                                                                                                                                                                                                                                                                                      1. Depository Institutions
                                                                                                                                                                                                                                                                                        1. Commercial Banks
                                                                                                                                                                                                                                                                                          1. Full-Service Banking
                                                                                                                                                                                                                                                                                            1. Lending Activities
                                                                                                                                                                                                                                                                                              1. Deposit Services
                                                                                                                                                                                                                                                                                              2. Savings and Loan Associations
                                                                                                                                                                                                                                                                                                1. Mortgage Lending Focus
                                                                                                                                                                                                                                                                                                  1. Thrift Institution Characteristics
                                                                                                                                                                                                                                                                                                  2. Credit Unions
                                                                                                                                                                                                                                                                                                    1. Member-Owned Structure
                                                                                                                                                                                                                                                                                                      1. Common Bond Requirements
                                                                                                                                                                                                                                                                                                      2. Savings Banks
                                                                                                                                                                                                                                                                                                        1. Mutual Ownership
                                                                                                                                                                                                                                                                                                          1. Community Focus
                                                                                                                                                                                                                                                                                                        2. Contractual Savings Institutions
                                                                                                                                                                                                                                                                                                          1. Life Insurance Companies
                                                                                                                                                                                                                                                                                                            1. Policy Reserves
                                                                                                                                                                                                                                                                                                              1. Long-Term Investments
                                                                                                                                                                                                                                                                                                              2. Property and Casualty Insurance Companies
                                                                                                                                                                                                                                                                                                                1. Premium Collection
                                                                                                                                                                                                                                                                                                                  1. Claims Reserves
                                                                                                                                                                                                                                                                                                                  2. Pension Funds
                                                                                                                                                                                                                                                                                                                    1. Defined Benefit Plans
                                                                                                                                                                                                                                                                                                                      1. Defined Contribution Plans
                                                                                                                                                                                                                                                                                                                        1. Asset Allocation Strategies
                                                                                                                                                                                                                                                                                                                      2. Investment Intermediaries
                                                                                                                                                                                                                                                                                                                        1. Mutual Funds
                                                                                                                                                                                                                                                                                                                          1. Open-End Funds
                                                                                                                                                                                                                                                                                                                            1. Closed-End Funds
                                                                                                                                                                                                                                                                                                                              1. Exchange-Traded Funds (ETFs)
                                                                                                                                                                                                                                                                                                                              2. Hedge Funds
                                                                                                                                                                                                                                                                                                                                1. Alternative Investment Strategies
                                                                                                                                                                                                                                                                                                                                  1. Accredited Investor Requirements
                                                                                                                                                                                                                                                                                                                                  2. Investment Banks
                                                                                                                                                                                                                                                                                                                                    1. Underwriting Services
                                                                                                                                                                                                                                                                                                                                      1. Mergers and Acquisitions
                                                                                                                                                                                                                                                                                                                                        1. Trading Activities
                                                                                                                                                                                                                                                                                                                                        2. Finance Companies
                                                                                                                                                                                                                                                                                                                                          1. Consumer Finance
                                                                                                                                                                                                                                                                                                                                            1. Commercial Finance
                                                                                                                                                                                                                                                                                                                                        3. Regulation of the Financial System
                                                                                                                                                                                                                                                                                                                                          1. Objectives of Regulation
                                                                                                                                                                                                                                                                                                                                            1. Safety and Soundness
                                                                                                                                                                                                                                                                                                                                              1. Consumer Protection
                                                                                                                                                                                                                                                                                                                                                1. Market Integrity
                                                                                                                                                                                                                                                                                                                                                  1. Systemic Risk Prevention
                                                                                                                                                                                                                                                                                                                                                  2. Regulatory Agencies
                                                                                                                                                                                                                                                                                                                                                    1. Federal Reserve System
                                                                                                                                                                                                                                                                                                                                                      1. Office of the Comptroller of the Currency (OCC)
                                                                                                                                                                                                                                                                                                                                                        1. Federal Deposit Insurance Corporation (FDIC)
                                                                                                                                                                                                                                                                                                                                                          1. Securities and Exchange Commission (SEC)
                                                                                                                                                                                                                                                                                                                                                            1. Commodity Futures Trading Commission (CFTC)
                                                                                                                                                                                                                                                                                                                                                            2. Capital Requirements
                                                                                                                                                                                                                                                                                                                                                              1. Basel Accords
                                                                                                                                                                                                                                                                                                                                                                1. Risk-Weighted Assets
                                                                                                                                                                                                                                                                                                                                                                  1. Tier 1 and Tier 2 Capital
                                                                                                                                                                                                                                                                                                                                                                  2. Deposit Insurance
                                                                                                                                                                                                                                                                                                                                                                    1. FDIC Insurance Coverage
                                                                                                                                                                                                                                                                                                                                                                      1. Moral Hazard Issues
                                                                                                                                                                                                                                                                                                                                                                        1. Risk-Based Premiums
                                                                                                                                                                                                                                                                                                                                                                        2. Consumer Protection
                                                                                                                                                                                                                                                                                                                                                                          1. Truth in Lending Act
                                                                                                                                                                                                                                                                                                                                                                            1. Fair Credit Reporting Act
                                                                                                                                                                                                                                                                                                                                                                              1. Consumer Financial Protection Bureau (CFPB)

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                                                                                                                                                                                                                                                                                                                                                                        2. Central Banking and the Money Supply Process