CHAPTER TWELVEMoney and finance
1. Introduction
A fundamental fact about real-world market economies is that private and sovereign producers of money interact in provisioning the economy with money and that the activity of finance directly influences real economic activity. Current macroeconomics distinguishes between the money market and the capital market: The former is defined as the market where the equilibrium between demand and supply of money is established; the latter, as the market where the equilibrium between saving and investment is determined.1
In contrast, we adopt an integrative view on the money market and the capital market which is based on a broad conception of finance and which instead disentangles ...
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