Money, Financial Intermediation and Governance

Money, Financial Intermediation and Governance

Dino Falaschetti and Michael J. Orlando

Dino Falaschetti and Michael Orlando unify the treatment of the many deeply related topics in money and banking in this wide-ranging book. By continually building on the assumption that economic actors are maximizers, they explain how monetary and financial services, as well as related governance mechanisms, influence economic performance. In this manner, Money, Financial Intermediation and Governance not only lets readers make sense of today’s monetary authorities and financial markets, it lets them see through superficial complexities to the fundamental influences that will shape those organizations for years to come.

Introduction

Dino Falaschetti and Michael J. Orlando

Subjects: business and management, corporate governance, economics and finance, corporate governance, financial economics and regulation, money and banking

Extract

Our objective for the present book is to develop a unified analysis of topics relating to ‘money and banking.’ This approach is attractive, both pedagogically and scientifically, but is largely missing from popular instructional materials. We fill this gap by continually grounding our insights on first principles. In particular, we gradually build on the assumption that economic actors are ‘maximizers’ (that is, households maximize utility and firms maximize profit) to understand how monetary and financial services, and the politics that govern their production, influence economic performance. Successful students will enjoy a lasting method with which to address important questions like the following: ● ● ● ● ● ● ● What is money and how does its supply relate to a) an economy’s consumption possibilities and b) fluctuations in economic performance (that is, business cycles)? Why have only history’s most recent societies enjoyed the benefits that ‘fiat’ monetary systems can produce (that is, currency systems that lack a commodity backing)? How can the governance of monetary authorities (for example, the United States’ Federal Reserve System) facilitate this enjoyment, and why do so many economies fall short on this dimension? How does the organization of intermediaries (that is, proximate suppliers of loanable funds) and governance of corporations (that is, proximate demanders of loanable funds) influence financial market efficiency? Is market discipline sufficient for financial market efficiency, or is public regulation necessary? Why is financial market efficiency so important for economic opportunity in general – that is, why is finance important...