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Monetary economics: a reading list

(Lars Christensen recently sent an e-mail asking for suggestions of five books that recipients would recommend to students of monetary economics. I assume that he will be posting the results on his blog, The Market Monetarist. His e-mail prompted me to retrieve the following more detailed survey that I wrote several years ago for my personal Web site, which is currently dark but will be posted again in a new location in a few months. Note that almost all books published in 1922 or before are now available for free someplace on the Internet, and that the Mises Institute has done good work in securing permission to post some newer works for free of the Austrian School and those who have influenced the Austrians. I have made a few updates for this post but have not updated all the links or inserted many new links. In the comments, I welcome suggestions for very important books in monetary economics, in the top 100 out of the many thousands that have been published on the subject.)

The readings here will provide a solid grounding for those interested in monetary theory and history. The list is written with economics graduate students in mind, since as far as I know there is no other recent list on the subject. The list reflects my beliefs in the importance of monetary history and alternatives to central banking. Books with asterisks (*) are those you should start with. The list does not include works on the monetary theory of business cycles. Dates are those of original editions; some books have been reprinted. Foreign readers will notice a predominance of material in English. Almost all the best foreign work in monetary economics has been translated into English.

Somebody asked me if I have really read all these books. I've read more than 90 percent of them all the way through and have read at least parts of all the rest (such as the reference volumes). I welcome suggestions for material to include or delete from the list, which I last updated slightly in January 2007. Some of the recent books may have newer editions than listed below.

Introductory books. (*)Dennis Robertson, Money (several editions beginning 1922) is a wonderfully lucid introduction. J. Huston McCulloch, Money and Inflation: A Monetarist Approach (2nd ed. 1982) is a suitable follow-up work. William Stanley Jevons, Money and the Mechanism of Exchange (1875) remains surprisingly useful. Alex N. McLeod, The Principles of Financial Intermediation (1984) is good but hard to find. No current textbook is outstanding, but okay texts include Meir G. Kohn, Money, Banking and Financial Markets (1993), Roger LeRoy Miller and David D. Van Hoose, Modern Money and Banking (3rd ed. 1993), and Frederic S. Mishkin, Economics of Money, Banking and Financial Markets (4th ed. 1995). If you read French, try Pascal Salin, La vérité sur la monnaie (1990).

Reading so-called high-level textbooks will in most cases reduce rather than increase your knowledge, because they focus on theoretical trivia rather than on the important issues. The graduate textbooks issued by MIT Press are a case in point. You are better off reading real books.

Monetary history. John Chown, A History of Money (1994) is as wide-ranging as its title implies. Abbott Payson Usher, The Early History of Deposit Banking in Mediterranean Europe (1943) covers the early history of modern banking. (*)Charles Conant, A History of Modern Banks of Issue (7 editions beginning 1896) surveys the history of banks the world over; read between the lines and you can learn a lot about the evolution of banking and about government involvement in the monetary system. Pierre Vilar, A History of Gold and Money, 1450-1920 (1969) is a useful although Marxian account. Charles Kindleberger, A Financial History of Western Europe (2nd ed. 1993) is an informative synthesis spanning 500 years, with a good bibliography. Kevin Dowd, editor, The Experience of Free Banking (1992) discusses historical episodes of free banking and also has a good bibliography. (*)Leland Yeager, International Monetary Relations: Theory, History, and Policy (2nd edition 1976) has an excellent historical account of the years 1914-1974. Harold James, International Monetary Cooperation Since Bretton Woods (1996) is a thorough discussion of its subject. Paul Einzig, History of Foreign Exchange (2nd ed. 1970) is wide-ranging in time and space.

In American monetary history, the standard works are Bray Hammond, Banks and Politics in the United States from the Revolution to the Civil War (1957) and Sovereignty and an Empty Purse (1970); (*)Milton Friedman and Anna J. Schwartz, A Monetary History of the United States, 1867-1960 (1963); and Richard H. Timberlake, Monetary Policy in the United States: An Intellectual and Institutional History (1993). A good neglected work is A. Barton Hepburn, A History of Coinage and Currency in the United States, and the Perennial Contest for Sound Money (1903). For early statistics, see J. Van Fenstermaker (Fenstermaker is his last name), The Development of American Commercial Banking: 1782-1837 (1965), which however is hard to find.

International monetary economics. Roy Harrod, International Economics (4 editions 1933-1958) is an introductory account still worth reading. The current standard undergraduate textbook is Paul R. Krugman and Maurice Obstfeld, International Economics: Theory and Policy (6th edition 2003); it is not bad but not great. (*)Leland B. Yeager, International Monetary Relations: Theory, History, and Policy (2nd edition 1976) is a superb treatise masquerading as a textbook. Other advanced textbooks are Jürg Niehans, International Monetary Economics (1984) and Peter Isard, Exchange Rate Economics (1995). Rudiger Dornbusch, Exchange Rates and Inflation (1988) is a collection of essays on currently fashionable topics in international monetary economics. Ronald R. MacDonald, Floating Exchange Rates: Theories and Evidence (1988) is a good survey of its topic; see also Michael Rosenberg, Currency Forecasting (1996). On the history of thought, see M. June Flanders, International Monetary Economics 1870-1960: Between the Classical and the New Classical (1989).

Monetary theory before 1900. I list here nothing but the choicest of the choice. Classics include John Law, Money and Trade Considered, With a Proposal for Supplying the Nation with Money (2nd ed. 1720); Isaac Gervaise, The System or Theory of the Trade of the World (1720); Fernando Galiani, Della Moneta (1751); David Hume, "Of the Balance of Trade" (1752); Richard Cantillon, Essai sur la nature du commerce en général (1755; English translation 1931); Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776); (*)Henry Thornton, An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802)–the most brilliant performance ever in monetary theory; Edwin Cannan, The Paper Pound of 1797-1821; The Bullion Report, 8th June 1810 (2nd edtion 1925), which reprints the influential British Parliamentary Bullion Report; David Ricardo, "Proposal for an Economical and Secure Currency" (1816) and On the Principles of Political Economy and Taxation (3rd edition 1821); Thomas Tooke, An Inquiry into the Currency Principle (1844) and A History of Prices (6 v., 1837-57); C. J. G. Goschen, The Theory of the Foreign Exchanges (1861); John Stuart Mill, Principles of Political Economy with Some of Their Applications to Social Philosophy (7th ed. 1871); Walter Bagehot, Lombard Street: A Description of the Money Market (1873); and Henry Dunning McLeod, The Theory and Practice of Banking (2 volumes, 1881). You will find many of these and a few other works mentioned in other sections in the fine McMaster University Archive for the History of Economic Thought, the Online Library of Liberty,  the Internet Archive, HathiTrust, Mises Institute, or Google Book Search (use the Advanced Book Search feature if a simple search does not yield the desired results).

Monetary theory since 1900: Swedes and Austrians. This tradition derives mainly from the Swedish economist Knut Wicksell. (*)Knut Wicksell, Lectures in Political Economy, volume 2 (1908; English translation 1934) expounds the theory of the "natural rate of interest" more clearly than Interest and Prices (1898). Gunnar Myrdal, Monetary Equilibrium (1931; English version 1939) develops the theory. One of the fountainheads of Austrian monetary thought is Ludwig von Mises, The Theory of Money and Credit (1912; English translation 1934)–ponderous but worthwhile. Tjardus Greidanus, The Value of Money (2nd edition 1950) is a neglected classic expounding a "yield theory" of money. Greidanus was Dutch.

The Swedes virtually disappeared as a distinctive school in monetary theory after the 1930s. The Austrians almost did, too, but revived in the 1970s. The "free banking" category below lists recent Austrian work.

Twentieth century monetary theory: monetarism. (*)C. A. Phillips, Bank Credit (1921) explains how the reserve multiplier works. Irving Fisher, The Theory of Interest (1930) and (*)The Purchasing Power of Money (revised edition 1931) describe the quantity theory approach. Milton Friedman, Essays in the Positive Economics (1953) and The Optimum Quantity of Money and Other Essays (1969) develop Fisher's ideas further; see also Milton Friedman and Anna J. Schwartz, A Monetary History of the United States, 1867-1960 (1963), and Harry G. Johnson, Essays in Monetary Theory (1967) and Further Essays in Monetary Theory (1973).

Twentieth century monetary theory: Cambridge (U.K.) and the Keynesians. Alfred Marshall, Money, Credit, and Commerce (1923) and Official Papers of Alfred Marshall (edited by John Maynard Keynes, 1926) contain the beginnings of the Cambridge school approach. (*)John Maynard Keynes, A Tract on Monetary Reform (1923) is better than his other major works on money, A Treatise on Money (2 volumes, 1930) and The General Theory of Employment, Interest and Money (1936). (*)John Hicks, Critical Essays in Monetary Theory (1967) is a marvelously stimulating collection. Don Patinkin, Money, Interest, and Prices: An Integration of Monetary and Value Theory (2nd ed. 1965) is a massive elaboration (or overelaboration) of the Keynesian-neoclassical synthesis.

Two works of the 1960s that are not really Keynesian but merit mention are John G. Gurley and Edward S. Shaw, Money in a Theory of Finance (1960), and Boris P. Pesek and Thomas R. Saving, Money, Wealth, and Economic Theory (1967). Jürg Niehans, The Theory of Money (1978) was state of the art when written–in other words, it has not aged well.

The best later Keynesians are Robert Clower and Axel Leijonhufvud: see (*)Donald A. Walker, ed., Money and Markets: Essays by Robert W. Clower (1984), and (*)Axel Leijonhufvud, Information and Coordination: Essays in Macroeconomic Theory (1981).

Mention should also be made of the Post-Keynesians. Geoffrey Ingham, The Nature of Money (2004) is by my reading the first classic of the school. Worthwhile older books are Paul Davidson, Money and the Real World (2nd ed. 1978), Colin Rogers, Money, Interest and Capital: A Study in the Foundations of Monetary Theory (1989), and L. Randall Wray, Understanding Modern Money (1998). Heinz-Peter Spahn, From Gold to Euro: On Monetary Theory and the History of Monetary Systems (2001) is influenced by Post-Keynesianism, though I do not know if the author would call himself Post-Keynesian.

Twentieth century monetary theory: the new classicals. Kevin Hoover, The New Classical Macroeconomics (1988) is a very good discussion of the new classical school, who have not yet produced any classic books on monetary theory; Torsten Persson and Guido Tabellini, eds., Monetary and Fiscal Policy (2 v., 1994) has the most important papers by the new classicals. (*)Fischer Black, Business Cycles and Equilibrium (1987) is a provocative collection of essays by a writer who fits neatly into no school but is closest to the new classicals.

Monetary regimes. This topic is related to monetary theory, but more closely focused on institutions. On central banking, see Henry Thornton, An Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802) and Walter Bagehot, Lombard Street: An Account of the Money Market (1873)–both classics; M. H. de Kock, Central Banking (several editions beginning 1939); (*)Charles Goodhart, The Evolution of Central Banks (1988); Alex Cukierman, Central Bank Strategy, Credibility, and Independence: Theory and Evidence (1992); and Anand Chandavarkar, Central Banking in Developing Countries (1996). Volume 2 of John Maynard Keynes's Treatise on Monetary Theory (1930) is something of a handbook on central banking. The best book on what guidelines to use for operating a central bank under floating exchange rates is Manuel H. Johnson and Robert F. Keleher, Monetary Policy, A Market Price Approach (1996). On free banking, see below. I am not impressed by the book that others consider the most important recent work in this field, Michael Woodford, Interest and Prices: Foundations of a Theory of Monetary Policy (2003), because it waxes long about details while neglecting to examine some truly foundational questions in any depth.

On the currency board system, see Steve H. Hanke, Lars Jonung, and Kurt Schuler, Russian Currency and Finance: A Currency Board Approach to Reform (1993). Maxwell Fry, Money, Interest, and Banking in Economic Development (2nd ed. 1995) is a good synthesis on its subject. No thorough account of socialist monetary systems exists, but Gavin Peebles, A Short History of Socialist Money (1991) is a sketch. On dollarization there is much material but as yet no really good book in English; in Spanish, see Jürgen Schuldt, Dolarización oficial de la economía (1999), the most successful use of the dialogue form I have ever seen in economics.

Free banking. For a detailed bibliography, see George A. Selgin and Lawrence H. White, "How Would the Invisible Hand Handle Money?," Journal of Economic Literature, December 1994. (If you belong to the American Economic Association you can obtain the article online.) Free banking thought goes all the way back to Adam Smith, and bloomed in the first half of the nineteenth century in Britain. (*)Lawrence H. White, Free Banking in Britain: Theory, Experience, and Debate 1800-1845 (2nd ed. 1995) summarizes the British free banking debates and discusses the history of the highly successful Scottish free banking system. Vera C. Smith (married name: Vera Lutz), The Rationale of Central Banking and the Free Banking Alternative (1990 [1936]) is an earlier survey of debates about free banking in Britain, America, and Western Europe.

Smith's book was a dissertation written under F. A. Hayek, who restarted the free banking movement with (*)Denationalisation of Money (1976; 3rd edition 1992). Hayek has influenced all other recent writers on free banking. (*)George Selgin, The Theory of Free Banking: Money Supply Under Competitive Note Issue (1988) is essential for an advanced understanding of free banking. It shows in detail why free banking works well and why central banking, like other forms of central planning, is unavoidably flawed. I consider this the second-best book ever written on money, after Henry Thornton's book, but it is not for beginners.

Kevin Dowd's The State and the Monetary System (1989) is the best introduction to free banking for readers totally unfamiliar with the idea. His Laissez Faire Banking (1993) is a collection of essays discussing theory and historical evidence on the stability of free banking systems and showing how free banking principles can guide present-day monetary reforms. (*)The Experience of Free Banking (1992) is a collection of essays by Dowd and others that analyzes nine historical episodes of free banking in detail and discusses the general experience of all the (almost sixty) currently known episodes of free banking. It refutes claims that free banking has not been widely tried or has not worked well.

Larry Sechrest, Free Banking: Theory, History and a Laissez-Faire Model (1993) reviews various approaches to free banking, including the author's own, and discusses their strengths and weaknesses. Lawrence H. White, editor, Free Banking (1993), is a three-volume collection of previously printed essays by various authors on the history of free banking. It contains almost everything printed so far on the subject except what is in The Experience of Free Banking. Mention must also be made of White's Competition and Currency: Essays on Free Banking and Money (1989), a collection of essays containing several gems. Steven Horwitz, Microfoundations and Macroeconomcs: An Austrian Perspective (2001) places free banking theory within a broader context of macroeconomics.

A few other books, not strictly on free banking, deserve notice. Roland Vaubel, Strategies for Currency Unification: The Economics of Currency Competition and the Case for a European Parallel Currency (1978) is a little-known but valuable book. M. L. Burstein's The New Art of Central Banking (1990) is written in a difficult style, but contains keen insights on the struggle between governments and markets and why markets will eventually win. Tyler Cowen and Randall Kroszner, Explorations in the New Monetary Economics (1993) examines the ideas of writers who as far back as the nineteenth century anticipated elements of the radically laissez faire approach of Burstein and others.

History of thought. The best recent summary is in French: Pierre-Bruno Ruffini, Les théories monétaires (1996), a brief work that manages to cover much ground. (*)Charles Rist, A History of Monetary and Credit Theory from John Law to the Present Day (1938) becomes less and less good the closer it comes to the time it was written. Lloyd W. Mints, A History of Banking Theory in Great Britain and the United States (1945) is interesting but idiosyncratic. (*)Joseph A. Schumpeter, History of Economic Analysis (1954) is a more general work that contains much history of monetary theory. M. June Flanders, International Monetary Economics 1870-1960: Between the Classical and the New Classical (1989) is engaging, but neglects most writers outside English-speaking countries.

Collections of journal articles. Three collections bear special mention: American Economic Association, Readings in Monetary Theory (1951), Thomas Mayer (editor), Monetary Theory (1990), and David Laidler (editor), The Foundations of Monetary Economics (3 volumes, 1999). The British publisher Edward Elgar prints collections of journal articles in various aspects of monetary economics in its "International Library of Macroeconomic and Financial History Series."

Practical works. Marcia Stigum, The Money Market (4th ed. 2007, revised by Anthony Crescenzi) is a superb description of all aspects of its subject. James C. Van Horne, Financial Market Rates and Flows (4th ed. 1994) is a useful summary of the financial theory underlying various financial instruments; see also Miles Livingston, Money and Capital Markets: Financial Instruments and Their Uses (1991). David E. W. Laidler, The Demand for Money: Theories, Evidence, and Problems (5th edition 1993) is a useful summary of the mainly useless studies on its subject.

Reference works; statistics. Perhaps because of the advent of the Internet, there does not seem to be any more recent book about information sources than James M. Rock, Money, Banking, and Macroeconomics: A Guide to Information Sources (1977). The standard encyclopedia of money and banking is (*)Peter Newman, Murray Milgate, and John Eatwell, editors, The New Palgrave Dictionary of Money and Finance (3 volumes, 1992; ). It's extremely good. For more detailed articles, see the Handbook series from North-Holland publishers (The Handbook of Monetary Economics, etc.).

For a chronology of currency devaluations to 1970, see Franz Pick and René Sédillot, All the Monies of the World: A Chronicle of Currency Values (1971). On interest rates, see Sidney Homer and Richard Sylla, A History of Interest Rates (3rd edition 1991). For historical tables of exchange rates, see Jürgen Schneider, Oskar Schwarzer, and Friedrich Zellfelder, Währungen der Welt (several volumes beginning 1991). For other historical statistics, see the volumes of international economic statistics edited by B[rian] R. Mitchell. For recent international statistics, see International Monetary Fund, International Monetary Statistics (since 1948; also online). For other information, see the defunct World Currency Yearbook (formerly Pick's Currency Yearbook). An online site that has some free information and some you have to pay for is Global Financial Data . From what I've seen, their data is not always completely accurate for historical cases, but that's simply because compiling the data is awfully hard sometimes.

Elsewhere on my site, you can find the beginnings of my attempt to collect information about the monetary authorities and exchange rate arrangements existing in all countries during modern times–basically, since paper money appeared. You may find my work useful to gain an overview of the monetary history of particular countries.

Journals. The two most important journals are the Journal of Money, Credit, and Banking and the Journal of Monetary Economics. Over the years they have come to embody more and more the academic vices of dullness and irrelevance. Other periodicals worth mentioning are IMF Staff Papers, Journal of International Money and Finance, Kredit und Kapital, and Central Banking .

For articles on monetary history, see Business History, Business History Review, Economic History Review, Explorations in Economic History, Journal of Economic History, and Journal of Financial History. For articles on the history of monetary thought, see History of Political Economy.

General economics journals that sometimes have useful articles on monetary theory or policy include the Cato Journal , Economic Development and Cultural Change, Kyklos, Journal of Development Economics, Journal of Institutional and Theoretical Economics, Journal of Political Economy, Weltwirtschafliches Archiv, World Bank Economic Review and World Bank Research Observer . The articles of other general economics journals are generally elaborations of the implausible and hence worthless, despite the prestige some of the journals have among economists.

Some journals are available through JSTOR (it's expensive, but if you are near a university library in the US and some other countries, the library should subscribe). The master source of listings of journal articles in monetary economics, as in every other field of economics, is the Journal of Economic Literature (accessible if you are a member of the American Economic Association), also available as the EconLit database on computer and as the Index to Economic Articles in annual volumes (the database and Index require extra fees). Its listings of articles in other languages are not as complete as listings of articles in English, but almost everything important in economics these days is either written in English or eventually translated into English. Many universities have the version of the EconLit database that has full-text access to many journal articles listed.

There are also many journals in finance and international economics, listed in the Journal of Economic Literature.

Working papers. Academic journals often take up to two years to publish accepted papers, so reading working papers enables one to keep more current. Some working paper series that are particularly relevant to monetary economics are those of the Bank for International SettlementsInternational Monetary FundNational Bureau for Economic Research (free if you live outside the OECD countries: click here for details), U.S. Federal Reserve System, and World Bank. An Internet master database is WoPEc (which stands for Working Papers in Economics).

Internet. A wealth of information is now available on the Internet from governments, central banks, universities, think tanks, and individuals. A good source list is Bill Goffe's Resources for Economists on the Internet . For other sites, use a search engine such as Yahoo or Google .

People. To find out who is doing research in your area, two good places to look are directories of members published by the American Economic Association (online directory) and Royal Economic Society (no online directory yet, but here's a link to their home page ). The American Economic Association [AEA], based in the United States, publishes the American Economic Review; the Royal Economic Society, based in England, publishes the Economic Journal. The directories list members' areas of specialization.

Addendum, 2013. To the above sources I would add the following: (a) Books: Carmen M. Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly (2009); William Barnett, Getting It Wrong: How Faulty Monetary Statistics Undermine the Fed, the Financial System, and the Economy (2011). (b) Statistical sources: Historical Financial Statistics, which I edit, and Federal Reserve Economic Data (FRED; useful especially for the United States, but covers dozens of other countries to varying degrees also); Markus A. Denzel, Handbook of World Exchange Rates, 1590-1914 (2010). (c) Blogs: I wrote about this in an earlier post as it relates to free banking, and although few or none of the blog posts will be read 100 years from now, or even 100 days from now, blogs are a good resource for students because economists who write them try to explain themselves more clearly than they do when they write in academic journals.