Some Notes on the Nature of Money and the Future of Monetary Policy

In a debate on the future of monetary policy and the displacement of money, Woodford argued that, even if innovations should lead to a situation in which the banks' demand for reserves at the central bank is zero, the central bank can still influence the economy's interest rates because its liability is the economy's unit of account. This paper deals with these topics by considering the implications of emphasizing the function of money as unit of account. In the analysis of money from this perspective, social, institutional and economic factors play a crucial role. Money is a social and historical relation. Therefore, the displacement of money and central banks, though possible, is a complex process involving economic, social and political factors, not merely the result of innovations. The paper also looks at some aspects of Kaldor's theory, which is centered on the fundamental importance of money as unit of account.