Creator: Levine, David K. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 388 Abstract:
Previous authors have argued that the optimal monetary policy is contractionary. If buyers value consumption substantially more than sellers, there is some randomness and informational constraints make asset trading useful, we show that there is an incentive compatible expansionary policy that dominates all incentive compatible contractionary policies.
Keyword: Expansion, Contraction, Optimal monetary policy, Asset trading, Trade, and Private information Subject (JEL): D82 - Information, knowledge, and uncertainty - Asymmetric and private information and E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy
Creator: Townsend, Robert M., 1948- and Wallace, Neil. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 209 Abstract:
We use a model of pure, intertemporal exchange with spatially and information-ally separated markets to explain the existence of private securities which circulate and, hence, play a prominent role in exchange. The model, which utilizes a perfect foresight equilibrium concept, implies that a Schelling-type coordination problem can arise. It can happen that the amounts of circulating securities that are required to support an equilibrium and that are issued at the same time in informationally separated markets must satisfy restrictions not implied by individual maximization and market clearing in each market separately.
Keyword: Trade, Schelling pure coordination game, and Debts Subject (JEL): D51 - General equilibrium and disequilibrium - Exchange and production economies and G14 - General financial markets - Information and market efficiency ; Event studies
Creator: Marimon, Ramon, 1953- and Wallace, Neil. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 288 Abstract:
The consequences of costly divisibility of assets are studied using a model with the following features. The demand for assets is generated from an overlapping generations model with a continuum of agents in each generation and with intra-generation trade (intermediation) ruled out. There is a once-for-all supply of a stock of nonnegative-dividend assets in a large size, and there is a costly technology for dividing them into smaller sizes. Stationary equilibria are shown to exist. In contrast with similar models with costless divisibility of assets, competitive equilibria are not necessarily desirable; there can be Pareto-ordered equilibria.
Keyword: Trade, Asset, and Depreciation Subject (JEL): D50 - General equilibrium and disequilibrium - General