Money and Collateral

Ferraris, Leo; Mattesini, Fabrizio

doi:10.1111/jmcb.12724

Cited by 4 publications

(2 citation statements)

References 39 publications

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“…See also the related paper by Cui and Radde (2016). 8 Several papers have exploited this feature in the monetary literature, including Berentsen et al (2007), Ferraris and Watanabe (2008), Geromichalos and Herrenbrueck (2017), Ferraris and Mattesini (2020), and Araujo and Ferraris (2020). See Lagos et al (2017) for a survey of liquidity in this class of models.…”

Section: Notesmentioning

confidence: 99%

Three liquid assets

2023

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We examine a theoretical model of liquidity with three assets—money, government bonds, and equity—that are used for transaction purposes. Money and bonds complement each other in the payment system. The liquidity of equity is derived as an equilibrium outcome. Liquidity cycles arise from the loss of confidence of the traders in the liquidity of the system. Both open market operations and credit easing play a beneficial role for different purposes.

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Section: Notesmentioning

confidence: 99%

Three liquid assets

2023

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“…They then study how various monetary policies affect real allocations and the accumulation of capital. Ferraris and Mattesini (2020) use the Lagos and Wright (2005) framework to study a model where agents may randomly have two buying opportunities simultaneouslyan opportunity to buy consumption goods and another to buy a valuable Lucas tree. Since agents need the money to buy goods, they cannot use it to buy the Lucas trees.…”

Section: Literature Reviewmentioning

confidence: 99%

On the essentiality of credit and banking at zero interest rates

Boel

Waller

2023

Working Paper (Federal Reserve Bank of Cleveland)

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We investigate the welfare-increasing role of credit and banking at zero interest rates in a microfounded general equilibrium monetary model. Agents differ in their opportunity costs of holding money due to heterogeneous idiosyncratic time-preference shocks. Without banks, the constrained-efficient allocation is never attainable, since impatient agents always face a positive implicit rate in equilibrium. With banks, patient agents pin down the borrowing rate and in turn enable impatient agents to borrow at no cost when the inflation rate approaches the highest discount factor. Banks can therefore improve welfare at zero rates, provided that both types of agents are included in the financial system and that the borrowing limit is sufficiently lax. The result is robust to several extensions.

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