Recently a great deal of attention has been focused on difficulties of interpreting the behavior of the monetary aggregates. The period since the mid-1970s has been characterized by unexpected changes in the relationship between traditional measures of the monetary aggregates and economic activity. Accompanying the disruption of established monetary relationships was an intensified effort by th...

A theory of money needs a proper place for financial intermediaries. Intermediaries diversify risks and create inside money. In downturns, micro-prudent intermediaries shrink their lending activity, fire-sell assets and supply less inside money, exactly when money demand rises. The resulting Fisher disinflation hurts intermediaries and other borrowers. Shocks are amplified, volatility spikes an...

The paper offers a new formulation of the old hypothesis that money exists due to shortage of other financial assets. The theory admits various monetary regimes, ranging from a strict gold standard to interest-bearing fiat money in the form of nominal government bonds. A central assumption is that claims on currently non-existing real assets, which will be productive in the future, are not trad...

This paper analyzes the role of money in asset markets characterized by search frictions. We develop a dynamic framework that brings together a model for illiquid financial assets à la Duffie, Gârleanu, and Pedersen, and a search-theoretic model of monetary exchange à la Lagos and Wright. The presence of decentralized financial markets generates an essential role for money, which helps investor...

Predictability of Asset Returns and the Efficient Market Hypothesis This paper is concerned with empirical and theoretical basis of the Efficient Market Hypothesis (EMH). The paper begins with an overview of the statistical properties of asset returns at different frequencies (daily, weekly and monthly), and considers the evidence on return predictability, risk aversion and market efficiency. T...

We develop a model of financial intermediation characterized by an inside agency problem such that asset managers, when they have access to high enough liquidity, “reach for yield” by overinvesting in risky assets and concurrently underinvesting in safer or medium-risk assets. The managers follow a pecking order whereby their first preference is to invest in risky assets; their second preferenc...

The real macroeconomic instability and frequent changes in the monetary and banking regulations with financial contagion to the banks’ financial statements in the banking network of Iran cause intensified instabilities in its financial behaviors. In this paper, using statistical analysis and three-dimensional charts, we have analyzed the behavior of the financial statements of consolidated bala...