We study the theoretical foundations of the New Monetarist Economics framework, a very popular model used in monetary economics. Key issues to be addressed are the role of liquidity in decentralized exchange, the frictions that make money essential and the role of credit and financial intermediation in the economy. On this basis, we will discuss various micro- and macroeconomic aspects of monetary theory and monetary policy. Stephen Williamson and Randall Wright formulate the key principles of the New Monetarist Economics framework in the article "New Monetarist Economics: Methods" that appeared in the Federal Reserve Bank of St. Louis Review (July/August 2010, 92(4), pp. 265-302) as follows:
Principle 1. Microfoundations matter, and productive analyses of macro and monetary economics, including policy discussions, require adherence to sound and internally consistent economic theory.
Principle 2. Money matters, and in the quest to understand monetary phenomena and monetary policy, it is decidedly better to use models that are explicit about the frictions that give rise to a role for money in the first place; as Wallace (1998) puts it, money should not be a primitive in monetary economics.
Principle 3. Financial intermediation matters- e.g., while bank liabilities and currency sometimes perform similar roles as media of exchange, for many issues treating them as identical can lead one astray.
Principle 4. In modeling frictions, like those that give rise to a role for money or financial intermediaries, one has to have an eye for the appropriate level of abstraction and tractability-e.g., the fact that in some overlapping generations models people live two periods, or that in some search models people meet purely at random, may make them unrealistic but it does not make them irrelevant.
Principle 5. No single model should be an all-purpose vehicle for dealing with every question in monetary economics, but it is still desirable to have a framework, or a class of models making use of similar assumptions and technical devices, that can be applied to a variety of issues.



Aleksander Berentsen [ contact ]           


Marina Markheim [ contact ]
Jeremias Lenzi [ contact ]


September 17th, 2019; 17:00-18:30; S16


November 15th, 2019; 09:00-18:00; S3

Seminar Paper

All the relevant information concerning the editorial work of your paper can be found in the Seminar guidelines. Please send your seminar paper (including the plagiarism form by mail to

Deadline: Sunday, January 5th 2020, Midnight.

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Presentations take place on November 15th, 2019 and are required to be in English. Presence for all presentations is mandatory. Each student has an assigned time slot of 45 minutes. Please leave some room for questions. See below for presentations guidelines.

Deadline for handing in the presentations (by mail to is Thursday, November 14th, midnight.

Presentation Schedule

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