Money as an Institution: Rule versus Evolved Practice?

Monetary policies and adjustments during a financial crisis depend on policy-makers’ conceptions on what money is and how it works. There is sufficient consensus among scholars that money is an institution created within the economic system and is in line with other institutions that regulate economic action. However, there are different understandings of what institutions are and how they operate, and these understandings imply differences in terms of monetary enforcement, resilience, responsiveness and stability. This paper discusses the two main approaches that conceptualise institutions as rules and as practices presenting an empirically informed discussion of money as an institution drawing on these insights. It grounds the analysis on the empirical case of Argentina as a monetary laboratory and the plurality of currencies that circulate in its economy. The study argues that while the official currency of Argentina corresponds to the institutions as rules approach, the adoption of the U.S. dollar into a bimonetary economy evolved as equilibrium. In between, the massive community currency systems that rose and declined during the economic meltdown between 1998 and 2002 were a hybrid institution that combined rules and practice. All three of them show various degrees of resilience and stability.

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