13,822 research outputs found
Private and public circulating liabilities
Changes in the legal and technological environment in the U.S. have created the possibility of private banknote issue, or its electronic equivalent. We wish to understand the implications of this possibility for economic performance. Accordingly, we construct and analyze a dynamic general equilibrium model in which privately-issued liabilities may circulate, either by themselves, or alongside a stock of outside money. In each case we provide results on the existence and multiplicity of equilibria, and we characterize local dynamics in a neighborhood of a steady state. Our results support Friedman's (1960) idea that circulating private liabilities as associated with endogenous (or "excess") volatility. But implementing Friedman's (1960) advice-the government should ban private issuance of close currency substitutes-causes significant inefficiency in our model. And implementing the polar opposite advice of Hayek (1976) and Fama (1980)-that the government should withdraw from currency issuance altogether in the presence of circulating private liabilities-also is often constrained suboptimal in our economies. Instead, our economies have both public and private circulating liabilities as part of an optimal monetary arrangement.Money ; Monetary theory
The value of inside and outside money: expanded version
We study dynamic economies in which agents may have incentives to hold both privately-issued (a.k.a. inside) and publicly-issued (a.k.a. outside) circulating liabilities as part of an equilibrium. Our analysis emphasizes spatial separation and limited communication as frictions that motivate monetary exchange. We isolate conditions under which a combination of inside and outside money does and does not allow the economy to achieve a first-best allocation of resources. We also study the extent to which the use of private circulating liabilities alone, or the use of public circulating liabilities alone, can address the frictions that lead to monetary exchange. We identify conditions under which both types of liabilities are essential to efficiency. However, even when these conditions are satisfied, we show that political economy considerations may lead to a prohibition against private circulating liabilities. Finally, we analyze the consequences of such a prohibition for the determinacy of equilibrium, and for endogenously arising volatility.Money ; Money theory
The value of inside and outside money
We study dynamic economies in which agents may have incentives to hold both privately-issued (a.k.a. inside) and publicly-issued (a.k.a. outside) circulating liabilities as part of an equilibrium. Our analysis emphasizes spatial separation and limited communication as frictions that motivate monetary exchange. We isolate conditions under which a combination of inside and outside money does and does not allow the economy to achieve a first-best allocation of resources. We also study the extent to which the use of private circulating liabilities alone, or the use of public circulating liabilities alone, can address the frictions that lead to monetary exchange. We identify conditions under which both types of liabilities are essential to efficiency. However, even when these conditions are satisfied, we show that political economy considerations may lead to a prohibition against private circulating liabilities. Finally, we analyze the consequences of such a prohibition for the determinacy of equilibrium, and for endogenously arising volatility.Money ; Money theory
Bank notes and stored-value cards: stepping lightly into the past
Like the bank notes that circulated in this country from 1863 to 1913, stored-value cards substitute the liabilities of private banks for government and central-bank liabilities. This shift may have important implications for the federal budget, the money supply, and monetary policy.Smart cards ; Money ; Monetary policy
Banks and the Design of the Financial System: Underpinnings in Steuart, Smith and Hilferding
Banks in bank-based financial systems tend to engage in long-term lending that requires substantial own capital to guarantee solvency. In market-based systems, in contrast, they tend to undertake short-term lending that requires adequate reserves to guarantee liquidity. Theoretical support for these two approaches to banking can be found in,respectively, Steuart and Smith. The innovative Marxist analysis of banking by Hilferding combined elements of both. Banks in the early stages of development are
Smith-like but, as the scale of fixed investment in industry grows, they lend long-term and become Steuart-like, also developing âcommitmentâ relations with enterprises. However, Hilferding also implied, erroneously, that financial systems historically evolve
in a bank-based direction. Based on Hilferding but also drawing on Japanese Marxist
analysis of finance, it is suggested instead that bank behaviour in bank-based systems
results from institutional changes imposed by policy-makers in order to achieve âcatching
up.
Restructuring of the Romanian Railways. The impact on the financial structure
The restructuring process has defined the basis for developing a sustainable and modern railway system. Nevertheless, a long list of challenges has still to be addressed: difficulties to finance the maintenance of the assets and investment capabilities, improving the standard of infrastructure on the railway network, the development of the passengerâs services.railway infrastructure, reform, profitability, financial structure, ratio
Target Loans, Current Account Balances and Capital Flows: The ECBâs Rescue Facility
The European Monetary Union is stuck in a severe balance of payments crisis. Greece, Ireland, Portugal and Spain in particular have suffered from balance of payment deficits whose accumulated value, as measured by the Target balances in the national central banksâ balance sheets, was 314 billion euros in March 2011. The national central banks of these countries covered the deficits by creating and lending out additional central bank money that flowed to the euro core countries, Germany in particular, and crowded out the central bank money resulting from local refinancing operations. Thus the ECB forced a public capital flow from the core countries to the peripheral countries that partly compensated for the now reluctant private capital flows.currency union, balance of payments, bailout, payment system.
Explaining the demand for free bank notes
Banks and banking - History ; Banks and banking - Minnesota ; Free banking ; Bank notes
Target Loans, Current Account Balances and Capital Flows: The ECBâs Rescue Facility
The European Monetary Union is stuck in a severe balance-of-payments imbalance of a nature similar to the one that destroyed the Bretton Woods System. Greece, Ireland, Portugal, Spain and Italy have suffered from balance-of-payments deficits whose accumulated value, as measured by the Target balances in the national central banksâ balance sheets, was 404 billion euros in August 2011. The national central banks of these countries covered the deficits by creating and lending out additional central bank money that flowed to the euro core countries, Germany in particular, and crowded out the central bank money resulting from local refinancing operations. Thus the ECB forced a public capital export from the core countries that partly compensated for the now reluctant private capital flows to, and the capital flight from, the periphery countries.
Reserves, Money Supply and Prices: The International Adjustment Mechanism in Sweden under the Silver and Gold Standards, 1834 â 1913
This paper explores how international capital movements affected the domestic money supply. This requires that the causality at work in the adjustment process be analyzed. For this purpose, series of central bank reserves, the monetary base, the money supply and the balance of payments were constructed. The methodological problems encountered in estimating such monetary measures in a transitional economy where much of the circulating money consists of private banks notes, and which is dependent on foreign loans, is discussed. The relationship between central bank (Riksbank) reserves and international capital flows is then studied. The overall growth of the money supply, while not accompanied by a growth in reserves, is found to correspond to such growth in other countries operating under a specie standard. This growth also was related to the growth of the real economy. Qualitative evidence aside, statistical results indicate a relationship among reserves, the money supply and prices that is consistent with the price specie flow mechanism. Changes in reserves were positively related to the money supply and changes in the money supply had a lagged positive effect on changes in the level of consumer prices.Balance of Payments; Central Bank Reserves; Classical Silver and Gold Standards; Monetary Base; Money Supply; Prices
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