A suggestion for further simplifying the theory of money
Abstract: Our suggestion consists of three postulates: assets are valued only in terms of their payoffs, perfect foresight, and complete and costless markets under laissez-faire. Together these postulates imply that the crucial anomaly, rate-of-return dominance of ?money,? is to be explained by legal restrictions. ; Our defense of these postulates is two-fold. First we compare them with existing alternative theories. Second, we provide an illustrative model which : (a) is consistent with the postulates, (b) implies rate-of-return dominance under suitable legal restrictions, and (c) addresses monetary policy questions with standard welfare economics and, in particular, rationalizes in terms of price discrimination a debt management policy that ?tailors debt issues to the needs of the market.?
File(s): File format is application/pdf http://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=343
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Staff Report
Publication Date: 1980