Money: A Market Microstructure Approach

Malte Krueger ()

MPRA Paper from University Library of Munich, Germany

Abstract: The current discussion about the future of the financial system draws heavily on a set of theories known as the ‘New Monetary Economics’. The New Monetary Economics predicts that deregulation and financial innovation will lead to a moneyless world. This paper uses a market microstructure approach to show that a common medium of exchange that serves as unit of account will remain a necessary instrument to reduce transaction costs. This finding is supported by empirical evidence from foreign exchange markets.

Keywords: New monetary economics; monetary separation; market microstructure theory; monetary theory; moneyless world; financial innovation (search for similar items in EconPapers)
JEL-codes: E42 E44 G20 (search for similar items in EconPapers)
Date: 2008-01
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:18416

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