Money, payments, and liquidity / Guillaume Rocheteau and Ed Nosal.

Format:

Book

Author/Creator:

Rocheteau, Guillaume, author.

Nosal, Ed, author.

Language:

English

Subjects (All):

Liquidity (Economics).

Monetary policy.

Money.

Physical Description:

xxvi, 473 pages ; 23 cm

Edition:

Second edition.

Place of Publication:

Cambridge, Massachusetts : The MIT Press, [2017]

Contents:

1 The Basic Environment 1

1.1 Benchmark Model 2

1.2 Variants of the Benchmark Model 6

1.3 Further Readings 6

2 Pure Credit Economies 9

2.1 Credit with Commitment 10

2.2 Credit Default 15

2.3 Credit with Public Record-Keeping 19

2.4 Credit Equilibria with Endogenous Debt Limits 23

2.5 Dynamic Credit Equilibria 29

2.6 Strategic Default in Equilibrium 30

2.7 Credit with Reputation 32

2.8 Further Readings 38

3 Pure Currency Economies 43

3.1 A Model of Divisible Money 44

3.1.1 Steady-State Equilibria 52

3.1.2 Nonstationary Equilibria 53

3.1.3 Sunspot Equilibria 57

3.2 Alternative Bargaining Solutions 58

3.2.1 Bargaining Set 59

3.2.2 The Nash Solution 61

3.2.3 The Proportional Solution 64

3.3 Walrasian Price Taking 66

3.4 Competitive Price Posting 68

3.5 Further Readings 73

4 The Role of Money 81

4.1 A Mechanism Design Approach to Monetary Exchange 82

4.2 Efficient Allocations with Indivisible Money 88

4.3 Two-Sided Match Heterogeneity 92

4.3.1 The Barter Economy 93

4.3.2 The Monetary Economy 97

4.4 Further Readings 104

5 Properties of Money 107

5.1 Divisibility of Money 109

5.1.1 Currency Shortage 110

5.1.2 Indivisible Money and Lotteries 114

5.1.3 Divisible Money 117

5.2 Portability of Money 119

5.3 Recognizability of Money 123

5.4 Further Readings 127

6 The Optimum Quantity of Money 133

6.1 Optimality of the Friedman Rule 135

6.2 Interest on Currency 139

6.3 Friedman Rule and the First Best 141

6.4 Feasibility of the Friedman Rule 143

6.5 Trading Frictions and the Friedman Rule 145

6.6 Distributional Effects of Monetary Policy 151

6.7 The Welfare Cost of Inflation 155

6.8 Further Readings 159

7 Information, Monetary Policy, and the Inflation-output Trade-off 163

7.1 Stochastic Money Growth 164

7.2 Bargaining Under Asymmetric Information 169

7.3 Equilibrium Under Asymmetric Information 176

7.4 The Inflation and Output Trade-Off 179

7.5 An Alternative Information Structure 186

7.6 Further Readings 189

8 Money and Credit 197

8.1 Dichotomy Between Money and Credit 199

8.2 Money and Credit Under Limited Commitment 203

8.3 Costly Record-Keeping 211

8.4 Strategic Complementarities and Payments 216

8.5 Credit and Reallocation of Liquidity 223

8.6 Short-Term and Long-Term Partnerships 228

8.7 Further Readings 233

9 Firm Entry, Unemployment, and Payments 239

9.1 A Model with Firms 240

9.2 Firm Entry and Liquidity 242

9.3 Fractional Labor Market 249

9.4 Unemployment, Money and Credit 255

9.5 Unemployment and Credit under Limited Commitment 258

9.6 Further Readings 260

10 Money, Negotiable Debt, and Settlement 263

10.1 The Environment 264

10.2 Frictionless Settlement 267

10.3 Settlement and Liquidity 270

10.4 Settlement and Default Risk 275

10.5 Settlement and Monetary Policy 279

10.6 Further Readings 281

11 Money and Capital 285

11.1 Linear Storage Technology 286

11.2 Concave Storage Technology 291

11.2.1 Nonmonetary Equilibria 291

11.2.2 Monetary Equilibria 293

11.3 Capital and Inflation 294

11.4 A Mechanism Design Approach 296

11.5 Further Readings 303

12 Exchange Rates, Nominal Bonds, and Open Market Operations 305

12.1 Dual Currency Payment Systems 306

12.1.1 Indeterminacy of the Exchange Rate 307

12.1.2 Cash-in-Advance with a Twist in a Two-Country Model 308

12.2 Money and Nominal Bonds 313

12.2.1 The Rate-of-Return Dominance Puzzle 314

12.2.2 Money and Illiquid Bonds 316

12.3 Recognizability and Rate-of-Return Dominance 317

12.4 Pairwise Trade and Rate-of-Return Dominance 323

12.5 Segmented Markets, Open Market Operations, and Liquidity Traps 325

22.6 Further Readings 333

13 Liquidity, Monetary Policy, and Asset Prices 335

13.1 A Monetary Approach to Asset Prices 336

13.2 Monetary Policy and Asset Prices 341

13.3 Risk and Liquidity 345

13.4 The Liquidity Structure of Assets' Yields 349

13.5 Costly Acceptability 354

13.6 Pledgeability and the Threat of Fraud 361

13.7 Further Readings 371

14 Asset Price Dynamics 377

14.1 Asset Prices with Perfect Credit 378

14.2 Asset Prices when Liquidity is Essential 381

14.3 Dynamic Equilibria 386

14.4 Stochastic Equilibria 391

14.5 Public Liquidity Provision 393

14.6 Further Readings 394

15 Trading Frictions in Over-the-counter Markets 397

15.1 The Environment 398

15.2 Equilibrium 400

15.3 Trading Frictions and Asset Prices 406

15.4 Intermediation Fees and bid-ask Spreads 409

15.5 Trading Delays 411

15.6 Further Readings 416

16 Crashes and Recoveries in Over-the-counter Markets 419

16.1 The Environment 420

16.2 Dealers, Investors, and Bargaining 420

16.3 Equilibrium 426

16.4 Efficiency 427

16.5 Crash and Recovery 430

16.6 Further Readings 435.

Notes:

Ed Nosal appeared as the first named author on the earlier edition.

Includes bibliographical references and index.

ISBN:

9780262035804

0262035804

9780262533270

0262533278

OCLC:

959033613