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Working Paper
Channel systems: Why is there a positive spread?
An increasing number of central banks implement monetary policy via two standing facilities: a lending facility and a deposit facility. In this paper we show that it is socially optimal to implement a non-zero interest rate spread. We prove this result in a dynamic general equilibrium model where market participants have heterogeneous liquidity needs and where the central bank requires government bonds as collateral. We also calibrate the model and discuss the behavior of the money market rate and the volumes traded at the ECB?s deposit and lending facilities in response to the recent ...
Working Paper
Private Takings
This paper examines the implications associated with a recent Supreme Court ruling, Kelo v. City of New London. Kelo can be interpreted as supporting eminent domain as a means of transferring property rights from one set of private agents ? landowners ? to another private agent ? a developer. Under voluntary exchange, where the developer sequentially acquires property rights from landowners via bargaining, a holdout problem arises. Eminent domain gives all of the bargaining power to the developer and, as a result, eliminates the holdout problem. This is the benefit of Kelo. However, ...