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Working Paper
Currency competition : a partial vindication of Hayek
This paper establishes the existence of equilibria for environments in which outside money is issued competitively. Such equilibria are typically believed not to exist because of a classic overissue problem: if money is valued in equilibrium, an issuer produces money until its value is driven to zero. By backward induction, money cannot have value in the first place. However, for any given finite amount of money outstanding, a monetary economy typically has two equilibria. In one, money has value; in the other, money is not valued because no one expects it to be valued. This paper takes this ...
Working Paper
Survey evidence of tighter credit conditions: what does it mean?
Since early 1990, the results of the Federal Reserve Board's Senior Loan Officer Opinion Survey on Bank Lending Practices have been cited frequently as an indicator of general credit availability. Results from the Board's survey suggest that a considerable share of respondent banks were tightening their lending standards during 1990 and early 1991. How should these results be interpreted? This article attempts to answer this question by addressing the nature of the survey, examining the recent responses more closely and comparing recent results to past results.
Journal Article
Credit aggregates from the flow of funds accounts
Working Paper
Liquidity constraints in commercial loan markets with imperfect information and imperfect competition
This paper presents a simple general equilibrium model of the commercial loan market in which liquidity constraints arise endogenously because of imperfect information and imperfect competition. The information and market structure generate a discriminatory interest rate schedule and loan size restrictions, which we interpret as liquidity constraint phenomena. The model's predictions are consistent with actual lending policies observed in the commercial loan industry. Further, the lender and all borrowers are at least as well off under this solution as they would be if faced with any single ...
Journal Article
Looking forward : the role for government in regulating electronic cash
With the year 2000 rapidly approaching, stored-value cards are already popular in some countries and are being introduced into the United States by private companies. Stored-value cards are one form of electronic cash?electronic substitutes for paper currency. Digital cash (also known as cybercash or ecash) is the other form of electronic cash coming into use today. It consists of bits and bytes in cyberspace and substitutes for paper currency in transactions made over the Internet.> Someday privately issued electronic cash may be a common means of payment in the United States. Looking ...
Working Paper
Welfare-improving credit controls
Credit controls are generally believed to result in an inefficient allocation of resources. This paper presents a counterexample. It displays a general equilibrium, multi-good model with spatial separation for which steady state equilibria exist in which both cash (i.e. fiat currency) and trade credit are used in exchange. Transaction costs, restrictions on the timing of trade, and a positive nominal interest rate cause the laissez-faire equilibrium to be non-optimal. A quantitative restriction on the use of trade credit can yield a Pareto superior allocation.
Conference Paper
How and why do consumers choose their payment methods?
This overview will summarize the existing literature on consumer payment behavior: what we know and don?t know, what we need to know, and the implications for public policy.
Working Paper
The evolution of cash transactions: some implications for monetary policy
This paper considers the implications of a decreasing demand for cash transactions under several monetary policy regimes. A policy of nominal-interest-rate targeting implies that a secular decline in the volume of cash transactions unambiguously leads to accelerating inflation. A policy of maintaining a fixed composition of government liabilities leads to accelerating (decelerating) inflation if agents have sufficiently high (low) levels of risk aversion. A policy of inflation targeting produces falling nominal and real interest rates, while a policy of fixing the rate of money growth can ...