What is money in a critical macro-finance framework?

Abstract

This forum contribution explains how analyzing the creation, distribution, and destruction of contemporary credit money is placed center stage in the emerging field of critical macro-finance. This approach not only involves traditional forms of money but also ‘shadow money’: private credit instruments which are not regulated as money from a legal standpoint, but in many respects are functionally equivalent to ‘established’ forms of money. Shadow money lay at the heart of the 2007-9 financial crisis and continues to be one of the ‘hot potatoes’ in the post-crisis monetary system (Pozsar, 2014; Gabor and Vestergaard, 2016, 2018; Ricks, 2016; Murau, 2017; Murau et al., 2020; Boy and Gabor, 2019; Wullweber, 2020). To connect different positions in this discourse, we propose three core criteria for defining shadow money as a baseline position for future critical macro-financial research.