We develop a random-matching model to study the price dynamics of monies produced privately according time-consuming mining technology. For our leading example, there exists unique equilibrium where value money increases over time and reaches steady state. There is also continuum perfect-foresight equilibria inflates bursts gradually time. Initially, held for speculative motive, but it acquires...

This paper develops a Bayesian quantile regression model with time-varying parameters (TVPs) for forecasting inflation risks. The proposed parametric methodology bridges the empirically established benefits of TVP regressions ability to flexibly whole distribution inflation. In order make our approach accessible and relevant forecasting, we derive an efficient Gibbs sampler by transforming stat...

Consumers make transactions of different sizes over time. This paper shows that this fact, together with transaction costs of various assets, can help in developing a theory of liquidity. Assets with different cost structures are used to purchase different sizes of transactions. This can explain the demand for money itself, the precautionary demand for money, and the demand for cash and demand ...

In this paper we investigate whether macroeconomic uncertainty could distort banks’ allocation of loanable funds. To provide a road– map for our empirical investigation, we present a simple framework which demonstrates that lower uncertainty about the return from lending should lead to a more unequal distribution of lending across banks as managers take advantage of more precise knowledge of di...

The purpose of this paper is to make a comparative analysis of modern gross payment systems, emphasizing on the implications of the availability of intraday liquidity and the different mechanisms used to provide this liquidity. The possibility of default and the risk of the intraday credit are first introduced to determine the implications of its existence on banks’ behaviour and on the probabi...

We study models of credit with limited commitment, which implies endogenous borrowing constraints. We show that there are multiple stationary equilibria, as well as nonstationary equilibria, including some that display deterministic cyclic and chaotic dynamics. There are also stochastic (sunspot) equilibria, in which credit conditions change randomly over time, even though fundamentals are dete...

This paper uses a panel of state-level data to test whether changes in bank loan supply affect output. Since the U.S. states are small open economies with fixed exchange rates, state-specific shocks to money demand are automatically accommodated, leading to changes in lending if banks rely on deposits as a source of funding. Using these shocks as an instrumental variable, I find that shocks to ...

U.S. Geological Survey, MS 964 Box 25046 1 Denver Federal Center, Denver, Colorado 80225 (303) 236-0925 email: [email protected] Center for the Study of Earth from Space (CSES)/ 2 Cooperative Institute for Research in Environmental Sciences (CIRES) and Department of Geological Sciences University of Colorado, Boulder, Colorado 80309-0216 Raytheon, Electronics Systems, Mailstop E51/A29...

We develop a theory of money and credit as competing payment instruments, then put it to work in applications. Buyers can use cash or credit, with the former (latter) subject to the inflation tax (transaction costs). Frictions making the choice of payment method interesting also imply equilibrium price dispersion, and together these deliver closed-form solutions for money demand. The model can ...

The literature on financial imperfections and business cycles has focused on propagation mechanisms. In this paper we model a pure reversion mechanism, such that the economy may converge to a two-period equilibrium cycle. This mechanism confirms that financial imperfections may have a dramatic amplification effect. Unlike in some related models, contracts are complete. Indexation is not assumed...