A Structured Approach for Comparing Monetary Theories

This article presents a structured approach for comparing monetary theories based on their primary monetary function.The proposed taxonomy clarifies and highlights the underlying assumptions of selected monetary theories and applies the derived lines of thought to historical examples.The advocated line of thought is a normative decision regarding the relative importance of the different functions.According to the 'store-of-value' line of thought, the conservation of purchasing power is the most relevant function.The 'medium-of-exchange' line of thought maintains a stable monetary value in the circulation of goods and services.The 'means-of-payment' line of thought emphasises an active role of money and the possible influence of the society on money and the economy.In contrast, the 'unit-of-account' line of thought reduces money to a passive role, adjusting elastically to the needs of the real economy.While no taxonomy can be comprehensive enough to include any specific monetary theory, our approach explores monetary theories by asking relevant questions and contextualising them.