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Monetary Economy (monetary + economy)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Banking crises in monetary economies

CANADIAN JOURNAL OF ECONOMICS, Issue 1 2008
Janet Hua Jiang
Abstract., This paper analyzes the effect of inflation on banking crises in a model in which money and banks play essential roles. The model's equilibrium replicates some key features of actual banking crises, namely, the partial suspension of payments and the desire to hold cash even in the absence of pressing liquidity needs. When banks have access to a stable foreign currency, inflation has a threshold effect on banking crises: higher inflation reduces the likelihood of crises when inflation is below the threshold; the reverse happens when inflation exceeds the threshold. This result appears to be broadly consistent with available evidence. Ce mémoire analyse les effets de l'inflation sur les crises bancaires dans un modèle où monnaie et banques jouent des rôles essentiels. L'équilibre du modèle prend en compte certains aspects clés des crises bancaires réelles: suspension partielle des paiements, désir de détenir de la monnaie liquide m,me quand on n'en a pas un besoin pressant. Quand les banques ont accès à une devise étrangère stable, l'inflation a un effet de seuil sur les crises bancaires: une forte inflation réduit la probabilité de crises quand l'inflation est sous un certain seuil, et l'inverse se produit quand l'inflation excède ce seuil. Les résultats paraissent s'arrimer aux résultats observés. [source]

WHO IS AFRAID OF THE FRIEDMAN RULE?

ECONOMIC INQUIRY, Issue 2 2008
JOYDEEP BHATTACHARYA
We explore the connection between optimal monetary policy and heterogeneity among agents in a standard monetary economy with two types of agents where the stationary distribution of money holdings is nondegenerate. Sans type-specific fiscal policy, we show that the zero-nominal-interest rate policy (the Friedman rule) does not maximize type-specific welfare; it may not maximize aggregate ex ante social welfare either. Indeed, one or, more surprisingly, both types may benefit if the central bank deviates from the Friedman rule. (JEL E31, E51, E58) [source]

2002 LAWRENCE R. KLEIN LECTURE LIQUIDITY AND ASSET PRICES*

INTERNATIONAL ECONOMIC REVIEW, Issue 2 2005
Nobuhiro Kiyotaki
We broadly define liquid assets, or monetary assets, as any asset that can be readily sold in the market and can be held by a number of people in succession before maturity. We ask in what environment is the circulation of liquid assets essential for the smooth running of the economy. By developing a canonical model of a monetary economy (i.e., where the circulation of liquid assets is essential), we are able to examine the interaction between liquidity, asset prices, and aggregate economic activity. [source]

MONEY AS A MECHANISM IN A BEWLEY ECONOMY*

INTERNATIONAL ECONOMIC REVIEW, Issue 2 2005
Edward J. Green
We investigate the efficiency property of a monetary economy with spot trade. We prove a conjecture that is essentially due to Bewley (Models of Monetary Economics (1980); Econometrica 51 (1983), 1485,504). The gist is that monetary spot trading is nearly efficient ex ante in an environment where very patient agents can accumulate large enough money stocks to be completely self-insured. We also study examples where a nonmonetary mechanism is preferred ex ante to any monetary mechanism in a stationary environment, and where an inflationary monetary mechanism is preferred ex ante to a laissez-faire or deflationary monetary mechanism in an environment with impatient agents. [source]

On the Welfare Implications of Customs Unions in the Presence of Finance Constraints

THE MANCHESTER SCHOOL, Issue 2 2001
Theodore Palivos
We examine the welfare effects of a customs union on a small monetary economy. The role of money is captured by a generalized cash-in-advance constraint which allows for non-uniform monetization across sectors. This generates a demand-side distortion which results in a discrepancy between the marginal domestic rate of substitution and the world price. We show that, depending on the economy's inflation rate and the difference between the existing and the optimal tariff rate, trade creation may reduce welfare while trade diversion may improve it. [source]

Price Rigidities, Inflationary Finance and Long-run Growth*

BULLETIN OF ECONOMIC RESEARCH, Issue 1 2000
Christopher Tsoukis
The paper considers a monopolistically competitive intertemporally optimizing monetary economy featuring long-term growth. Inflation is generated through sluggish price-setting and contributes to budgetary finance through seignorage. This setup permits exploration of the interaction between inflation and growth in a tractable way. Superneutrality holds in the long but not the short run. The budget deficit fuels inflation with a hysteresis. Growth and inflation are negatively correlated in the long run, with causality running from the former to the latter, and positively correlated in the short run regardless of the origin of shocks. Price flexibility precipitates adjustment but appears also to destabilize output. [source]