Macro-Financial Governance (MFG)
Research Leader: Steffen Murau
The Macro-Financial Governance process investigates the modern credit money system from a political economy perspective. The process seeks to understand how political actors are able to steer financial activity in a way that is conducive to reach their policy goals, including the financing of large-scale transformations such as the Green Transition to net-zero carbon emissions.
Monetary architecture is a conceptual framework to represent historically specific monetary and financial systems as a web of balance sheets that comprises different monetary and fiscal institutions and interlocks via different credit instruments.
The “grammar” of the monetary architecture approach has several building blocks. It starts with monetary jurisdiction as a legal category that is subdivided into segments: central banks, commercial banks, non-bank financial institutions (NBFIs), and a fiscal ecosystem, which is made up of treasuries and off-balance-sheet fiscal agencies (OBFAs). Each segment comprises different institutions that are represented as balance sheets and have a hierarchical relationship with each other. They interlock through the instruments they hold as assets and liabilities, which are denominated in different units of account. This adds up to a fully self-referential credit system in which each asset is another institution’s liability. What counts as money depends on a balance sheet’s relative position in the hierarchy and can change over time. Each institution has its own respective elasticity space for balance sheet expansion.
The monetary architecture framework can be used to represent past, present, or future institutional settings of the monetary and financial system. It provides the conceptual lens for the OBFA-TRANSFORM project to study the setup and the evolution of the monetary and financial system in the context of large-scale transformations
The Macro-Financial Governance process offers the possibility to supervise Bachelor or Master theses. If your are a student of political economy or neighbouring disciplines and would like to carry out research using the Monetary Architecture framework and/or write on a topic relevant to the work of the process, please reach out to: steffen.murau@globalclimateforum.org
