Did you know that in around 770 B.C., the Chinese were the first to invent a system of paper money? Monetary economics is a branch of economics that studies the various competing theories of money: it provides a framework for analysing money and considering its functions (such as medium of exchange, store of value, and unit of account), as well as how money, such as fiat currency, can gain acceptance solely due to its convenience as a public good. Macroeconomics has always been prefigured by this field, and it remains inextricably related to it. This field also looks into the effects of monetary systems, such as money regulation and related financial institutions, as well as international issues. Modern research has attempted to offer microfoundations for money demand and to distinguish between genuine nominal and real monetary relationships for micro and macro applications, including their impact on aggregate demand for output. Deriving and testing the implications of money as a substitute for other assets and as based on explicit frictions are among its approaches.

Payal Jain

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