An Essay on Monetary Theory
Vincenz Timmermann


   This paper surveys monetary theories of the last three centuries. At the time of the major monetary theory debates in the 19th and 20th centuries, the main focus was on three key questions as far as the development of the theory of money was concerned: "What is money?", "How does money work?" and "How is the adequate money supply channelled into the economy?". As part of the dispute relating to the Restriction Act of 1797 in England, the issues of an adequate money supply and the workings of money in general were discussed. The debates concerning Peel's Bank Charter of 1844 hinged on what had to be considered or treated as money, and how this was to be regulated. In the controversies between Keynesians and Monetarists in the second half of the 20th Century, above all the problem of short-, medium and long-term effects of changes in money supply on prices, income and employment as well as the issue of effective controls of money supply changes became the central topics of discussion.