I propose a model where agents optimally choose to conduct their business using two payment instruments, money and bilateral credit. A friction in the timing of transactions rationalizes the use of both instruments and makes it optimal for agents to use money as a means of settlement for credit. Money and credit complement each other. With anticipated in‡ation, complementarity implies that the ...

Neural representations of the effort deployed in performing actions, and the valence of the outcomes they yield, form the foundation of action choice. To discover whether brain areas represent effort and outcome valence together or if they represent one but not the other, we examined these variables in an explicitly orthogonal way. We did this by asking human subjects to exert one of two levels...

We study the optimal anticipated policy in a pure-currency economy with flexible prices and a nondegenerate distribution of money holdings. The economy features a business cycle and lump-sum monetary injections have distributional effects that depend on the state of the cycle. We parsimoniously characterize the dynamics of the economy and study the optimal regulation of the money supply as a fu...

Motivation for goal-directed behaviour largely depends on the expected value of the anticipated reward. The aim of the present study was to examine how different levels of reward value are coded in the brain for two common forms of human reward: money and social approval. To account for gender differences 16 male and 16 female participants performed an incentive delay task expecting to win eith...

Three studies demonstrated that anticipated self-blame elicits more conservative decisions about risks that require trust than about otherwise economically identical risks that do not. Participants were more reluctant to invest money in a company when it risked failure due to fraud versus low consumer demand (Study 1), and to risk points in an economic game when its outcome ostensibly depended ...

Damage to the orbital prefrontal cortex has been implicated in selectively diminishing electrodermal autonomic nervous system responses to anticipated punishing stimuli (e.g., losing money; Bechara, Damasio, & Damasio, 2000), but not to unanticipated punishing stimuli (e.g., loud noises; Damasio, Tranel, & Damasio, 1990). We extended this research by examining the effects of orbitofrontal damag...

This article introduces a new way of understanding subjective probability and its generalization to lower and upper prevision. Instead of asking whether a person is willing to pay given prices for given risky payoffs, we ask whether the person believes he can make a lot of money at those prices. If not—if the person is convinced that no strategy for exploiting the prices can make him very rich ...

This paper analyzes the dynamic eff ects of anticipated and unanticipated oil price increases in a small two-country monetary union, which is simultaneously characterized by asymmetric wage adjustments and asymmetric interest rate sensitivities of private absorption. Common external oil price disturbances lead in this asymmetric macroeconomic setup to temporary divergences in output development...

L ike any practical, policy-oriented discipline, monetary economics employs useful concepts long after their prototypes and originators are forgotten. A case in point is the notion of a velocity function relating money’s rate of turnover to its independent determining variables. Most economists recognize Milton Friedman’s influential 1956 version of the function. Written v = Y/M = v(rb, re, 1/P...