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Creator: Bryant, John B. and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 189 Parola chiave: Prohibition, Government debt, Rate of return dominance, and Private currency Soggetto: E40 - Money and Interest Rates: General and E52 - Monetary Policy
Creator: Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 347 Descrizione:
The Harry G. Johnson Lecture, presented at the 1987 A.U.T.E. and the Royal Economic Society Conference, Aberyswyth, April 1-4.
Parola chiave: Monetary theory, Inside money, Assets, Outside money, Equilibrium model, and Currency Soggetto: E40 - Money and Interest Rates: General and G12 - Asset Pricing; Trading Volume; Bond Interest Rates
Creator: Wallace, Neil and Zhou, Ruilin Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 569 Abstract:
Until the mid-19th century, shortages of currency were sometimes serious problems. One common response was to prohibit the export of coins. We use a random matching model with indivisible money to explain a shortage and to judge the desirability of a prohibition on the export of coins. The model, although extreme in many regards, represents better than earlier models a demand for outside money and the problems that arise when that money is indivisible. It can also rationalize a prohibition on the export of coins.
Parola chiave: Indivisible money, Export of coins, and Currency shortage Soggetto: N10 - Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: General, International, or Comparative, E40 - Money and Interest Rates: General, and E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
Creator: Katzman, Brett, 1966-, Kennan, John, and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 595 Abstract:
The effects on ex ante optima of a lag in seeing monetary realizations are studied using a matching model of money. The main new ingredient in the model is meetings in which producers have more information than consumers. A consequence is that increases in the amount of money that occur with small enough probability can have negative impact effects on output, because it is optimal to shut down trade in such low probability meetings rather than have lower output when high probability realizations occur. The information lag also produces prices that do not respond much to current monetary realizations.
Soggetto: E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data), E40 - Money and Interest Rates: General, and D82 - Asymmetric and Private Information; Mechanism Design
Creator: Alvarez, Fernando, 1964-, Atkeson, Andrew, and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 278 Abstract:
This paper analyzes the effects of money injections on interest rates and exchange rates in a model in which agents must pay a Baumol-Tobin style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money only infrequently. When the government injects money through an open market operation, only those agents that are currently trading absorb these injections. Through their impact on these agents’ consumption, these money injections affect real interest rates and real exchange rates. We show that the model generates the observed negative relation between expected inflation and real interest rates. With moderate amounts of segmentation, the model also generates other observed features of the data: persistent liquidity effects in interest rates and volatile and persistent exchange rates. A standard model with no fixed costs can produce none of these features.
Parola chiave: Fixed costs, Liquidity effects, Volatile real exchange rates, Baumol-Tobin model, and Term structure of interest rates Soggetto: F31 - Foreign Exchange, E52 - Monetary Policy, F41 - Open Economy Macroeconomics, E43 - Interest Rates: Determination, Term Structure, and Effects, and E40 - Money and Interest Rates: General
Creator: Arellano, Cristina and Heathcote, Jonathan Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 385 Abstract:
How does a country’s choice of exchange rate regime impact its ability to borrow from abroad? We build a small open economy model in which the government can potentially respond to shocks via domestic monetary policy and by international borrowing. We assume that debt repayment must be incentive compatible when the default punishment is equivalent to permanent exclusion from debt markets. We compare a floating regime to full dollarization.
We find that dollarization is potentially beneficial, even though it means the loss of the monetary instrument, precisely because this loss can strengthen incentives to maintain access to debt markets. Given stronger repayment incentives, more borrowing can be supported, and thus dollarization can increase international financial integration. This prediction of theory is consistent with the experiences of El Salvador and Ecuador, which recently dollarized, as well as with that of highly-indebted countries like Italy which adopted the Euro as part of Economic and Monetary Union: in each case, around the time of regime change, spreads on foreign currency government debt declined substantially.
Parola chiave: Debt policy, Borrowing limits, Exchange rate regime, and Dollarization Soggetto: E40 - Money and Interest Rates: General and F30 - International Finance: General
Creator: Kocherlakota, Narayana Rao, 1963- Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 393 Abstract:
This paper considers four models in which immortal agents face idiosyncratic shocks and trade only a single risk-free asset over time. The four models specify this single asset to be private bonds, public bonds, public money, or private money respectively. I prove that, given an equilibrium in one of these economies, it is possible to pick the exogenous elements in the other three economies so that there is an outcome-equivalent equilibrium in each of them. (The term “exogenous variables” refers to the limits on private issue of money or bonds, or the supplies of publicly issued bonds or money.)
Parola chiave: Money bonds and Incomplete markets Soggetto: E51 - Money Supply; Credit; Money Multipliers and E40 - Money and Interest Rates: General