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An objective and perceptive account of the literature of monetary theory, this volume, by a central banker who has studied monetary theory over the last quarter of a century, clearly shows how its inherent complexity is much enriched by the study of its history.In three parts Filippo Cesarano:focuses on the innovative ideas of distinguished economists who anticipated modern theories, elaborating on them along lines that suggest original research programmes examines the impact of expectations on the effectiveness of monetary policy, illustrating how different assumptions within the classical pa

John Maynard Keynes put forward a number of proposals to reshape the international monetary system. Although variegated, they do have one characteristic in common—the rejection of freely flexible exchange rates—which, in a sense, is like a prism refracting the different shades of his many reform plans. This is somewhat puzzling insofar as it clashes with Keynes's call for activist monetary policy. Indian Currency and Finance sheds light on the origins and arguments underlying this peculiar feature and is accordingly most significant in the development of Keynes's work on the international monetary system.

From the dawn of coined money to just a few decades ago, the monetary system had been linked, directly or indirectly, to a commodity. The age-long dominance of metallism is puzzling because the conventional character of money, or cartalist theory, had already been grasped in the earliest writings on the subject, notably by Plato. The evolution of the monetary system led to the emergence of metals as the dominant form of money owing to their well-known qualities of durability, homogeneity, divisibility, and the like. Yet, these physical qualities actually relate to market properties underlying the natural selection of media of exchange, enhancing the microeconomic efficiency in performing monetary functions and the macroeconomic effectiveness of maintaining monetary stability. After inquiring about the puzzle of metallism, this article investigates the development of the cartalist hypothesis and the origins of monetary management.

The Bretton Woods agreements set up the post‐war monetary order on the basis of fixed exchange rates and autonomous national economic policy. Changes in parity were allowed in the case of fundamental disequilibrium, but this concept was not defined, promoting a lengthy but sterile debate. This paper, after reviewing the main features of the discussion, analyzes Keynes's overlooked contribution, which helps to clarify the issue at stake.

This paper inquires into monetary standards, focusing on the characteristics of money instead of the exchange rate regime. The transition from commodity to fiat money, a major break in monetary evolution, has led to international arrangements that represent an application of the competitive money supply model (section 1), which is consistent with various optimality criteria and has far‐reaching implications for the future development of the monetary system (section 2).

The optimum quantity of money proposition, whose validity is agreed on, is actually open to criticism. The present paper argues that the weaknesses of the Friedman Rule from the application of the welfare theorems of general equilibrium theory to a monetary economy and shows how, the consistency of the criticism notwithstanding, the optimal solution can still be implemented.

Classical economists developed a surprisingly sophisticated analysis of money supply variations that, anticipating the main features of contemporary theory, emphasizes the role of information in the transmission mechanism. Drawing on the classical contributions, this paper outlines a general approach to monetary policy, treating information as a scarce commodity allocated optimally by rational agents.

According to the New Monetary Economics (NME), the introduction of
non‐tangible payments media would altogether invalidate current monetary
economics. After an illustration of the main tenets of the NME,
critically analyses its rejection of both the quantity theory and
liquidity preference on the basis of Keynes′ theory of money.