Search Results
Conference Paper
Inside and outside money as alternative media of exchange
Working Paper
Resolving the National Banking System note-issue puzzle
Under the National Banking System, 1863-1914, national banks that deposited sufficient collateral could issue notes provided they paid a tax on notes in circulation: 1 percent per year before 1900 and 1/2 percent thereafter. Because note issue was far below the allowed maximum, an arbitrage argument predicts that short-term nominal interest rates should have been bounded above by the tax rate. They were not. That is the note-issue puzzle. Our resolution takes the form of a model in which notes play a role, but in which the profitability of note issue is not tied to anything that resembles a ...
Working Paper
A model of (the threat of) counterfeiting
A simple matching-model of money with the potential for counterfeiting is constructed. In contrast to the existing literature, counterfeiting, if it occurred, would be accompanied by two distortions: costly production of counterfeits and harmful effects on trade. However, application of the Cho-Kreps refinement is shown to imply that there is no equilibrium with counterfeiting. If the cost of producing counterfeits is low enough, then there is no monetary equilibrium. Otherwise, there is a monetary equilibrium without counterfeiting.
Working Paper
The role of independence in the Green-Lin Diamond-Dybvig model
Green and Lin study a version of the Diamond-Dybvig model with a finite number of agents, independence (independent determination of each agent?s type), and sequential service. For special preferences, they show that the ex ante first-best allocation is the unique equilibrium outcome of the model with private information about types. Via a simple argument, it is shown that uniqueness of the truth-telling equilibrium holds for general preferences, and, in particular, for a constrained-efficient allocation whether first-best or not. The crucial assumption is independence.
Conference Paper
Search-theoretic models of international currency - commentary
Journal Article
Search-theoretic models of international currency - commentary
Journal Article
Why the Fed should consider holding Mo constant
Journal Article
S. Rao Aiyagari: my student and my teacher
This essay briefly reviews the professional life and work of economist S. Rao Aiyagari, who died after a heart attack on May 20, 1997, at the age of 45. Aiyagari is described as ?one of the ablest economists of his generation.? The essay is accompanied by a complete list of Aiyagari?s published work and reprints of three of his articles in the Federal Reserve Bank of Minneapolis Quarterly Review: ?Deflating the Case for Zero Inflation? (Summer 1990), ?On the Contribution of Technology Shocks to Business Cycles? (Winter 1994), and ?Macroeconomics With Frictions? (Summer 1994).
Journal Article
SPDAs and GICs: like money in the bank?
We argue that changes in the life insurance industry have created a nontrivial moral hazard. We document the industry's shift from sales of life insurance to sales of mainly rate-of-return oriented investments like single premium deferred annuities (SPDAs) and guaranteed investment contracts (GICs). We describe the system of explicit and implicit guarantees that state governments and the industry provide to SPDA and GIC investors. We argue that these guarantees create moral hazards that have contributed to insurance company failures and misallocation of resources. We summarize reformers' ...