Abstract The paper contributes to the discussion on whether real interest rates below growth can be taken as evidence of dynamic inefficiency so that some fiscal intervention may called for. A seemingly killing objection points land, a non-produced durable asset in positive supply, reason why ruled out. If were expected forever, value land would unbounded, which is incompatible with equilibrium...

The framework in Lagos and Wright (2005) combining decentralized and centralized markets is used extensively in monetary economics, for several reasons: it has relatively solid microfoundations; it is tractable; it integrates naturally with other theories; and it is easily quantifiable. Much is known about this model, but there is one loose end: only under very special assumptions about bargain...

Abstract We study today’s two-tier money creation and destruction system: Commercial banks create bank deposits (privately created money) through loans to firms or asset purchases from the private sector. Bank are destroyed when households buy equity repay loans. Central electronic central (publicly reserves) commercial banks. In a simple general equilibrium setting, we show that symmetric equi...

This paper considers an asset model that generates a monetary equilibrium in which capital, government bonds, and fiat money are held as perfect substitutes. Due to a congestion effect, output per producer is a decreasing function of the aggregate capital stock, and this effect makes a legal restriction on capital accumulation welfare enhancing. The restriction considered is that the money to c...

I formulate a search-based asset-pricing model where equity shares and fiat money can be used as means of payment. I characterize a family of optimal stochastic monetary policies. Every policy in this family implements Friedman’s prescription of zero nominal interest rates. Under an optimal policy, equity prices and returns are independent of monetary considerations. I also study a perturbation...

We consider a Diamond-type model of endogenous growth in which there are three assets: fiat money, government bonds, and equity. Because of productivity shocks, the equity return is uncertain, and risk-averse investors require a positive equity premium. Typically, there exist two steady states, but only one of them turns out to be stable. Tight monetary policy is harmful for growth in the stabl...

In spite of their importance in real economics, multiple equilibria in closed exchange and production-and-exchange economies are usually ignored in macroeconomic models. We argue that default and bankruptcy laws create conditions for a unique equilibrium. We report experimental evidence on the effectiveness of assigning default penalties on fiat money to resolve this multiplicity and select a s...

A cryptocurrency is a digital currency backed by mathematics and cryptography, compared to traditional fiat money which was traditionally backed by gold or silver. The foundation of many cryptocurrencies is based on a key derivation scheme known as scrypt [3]. Cryptocurrencies, such as Bitcoin [2], provide a means of having a decentralized, distributed, peer-to-peer electronic cash system. Thes...