Money, Payments, and Liquidity
Ed Nosal and Guillaume Rocheteau
Abstract
This book provides an investigation into the economics of money and payments by explicitly modeling trading frictions between agents. Adopting the search-theoretic approach pioneered by Nobuhiro Kiyotaki and Randall Wright, it provides a logically coherent dynamic framework to examine the frictions in the economy that make money and liquid assets play a useful role in trade. The book duscusses the implications of such frictions for the suitable properties of a medium of exchange; monetary policy; the cost of inflation; the inflation-output trade-off; the coexistence of money, credit, and highe ... More
This book provides an investigation into the economics of money and payments by explicitly modeling trading frictions between agents. Adopting the search-theoretic approach pioneered by Nobuhiro Kiyotaki and Randall Wright, it provides a logically coherent dynamic framework to examine the frictions in the economy that make money and liquid assets play a useful role in trade. The book duscusses the implications of such frictions for the suitable properties of a medium of exchange; monetary policy; the cost of inflation; the inflation-output trade-off; the coexistence of money, credit, and higher return assets; settlement; and liquidity. After presenting the basic environment used, the book examines pure credit and pure monetary economies, and discuss the role of money, different pricing mechanisms, and the properties of money. Subsequent chapters study monetary policy, the Friedman rule in particular, and the relationship between inflation and output under different information structures; economies where monetary exchange coexists with credit transactions; the coexistence of money and other assets such as another currency, capital, and bonds; and a continuous-time version of the model that describes over-the-counter markets and different dimensions of liquidity (bid-ask spreads, trade volume, trading delays).
Keywords:
economics of money,
payments,
trading frictions,
agents,
search-theoretic approach,
Nobuhiro Kiyotaki,
Randall Wright,
liquid assets,
trade,
monetary policy
Bibliographic Information
| Print publication date: 2011 |
Print ISBN-13: 9780262016285 |
| Published to MIT Press Scholarship Online: August 2013 |
DOI:10.7551/mitpress/9780262016285.001.0001 |
