Hardly one topic in contemporary economic policy discussion has attracted more attention than the monetary policy of the Bundesbank. This study develops both from a microeconomic and an econometric point of view foundations for the currently pursued monetary targeting regime of the German Central Bank. The underlying theme of the study is the integration of the functions of money in non-Walrasian economies into relevant areas of the analysis. This way an attempt is made to put sufficient emphasis on money's central role as means of exchange.