Money Payments and Liquidity 2nd edition by Guillaume Rocheteau, Ed Nosal – Ebook PDF Instant Download/Delivery: 0262533270, 9780262533270
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ISBN 10: 0262533270
ISBN 13: 9780262533270
Author: Guillaume Rocheteau, Ed Nosal
A new edition of a book presenting a unified framework for studying the role of money and liquid assets in the economy, revised and updated.
In Money, Payments, and Liquidity, Guillaume Rocheteau and Ed Nosal provide a comprehensive investigation into the economics of money, liquidity, and payments by explicitly modeling the mechanics of trade and its various frictions (including search, private information, and limited commitment). Adopting the last generation of the New Monetarist framework developed by Ricardo Lagos and Randall Wright, among others, Nosal and Rocheteau provide a dynamic general equilibrium framework to examine the frictions in the economy that make money and liquid assets play a useful role in trade. They discuss such topics as cashless economies; the properties of an asset that make it suitable to be used as a medium of exchange; the optimal monetary policy and the cost of inflation; the coexistence of money and credit; and the relationships among liquidity, asset prices, monetary policy; and the different measures of liquidity in over-the-counter markets.
The second edition has been revised to reflect recent progress in the New Monetarist approach to payments and liquidity. Rocheteau and Nosal have added three new chapters: on unemployment and payments, on asset price dynamics and bubbles, and on crashes and recoveries in over-the-counter markets. The chapter on the role of money has been entirely rewritten, adopting a mechanism design approach. Other chapters have been revised and updated, with new material on credit economies under limited commitment, open-market operations and liquidity traps, and the limited pledgeability of assets under informational frictions.
Money Payments and Liquidity 2nd Table of contents:
Acknowledgments xi
Preface to the Second Edition xiii
General Introduction xv
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
Bibliography 437
Index 461
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Tags: Guillaume Rocheteau, Ed Nosal, Money Payments