Enriching Information to Prevent Bank Runs

Sequential service in the banking sector, as modeled by Diamondand Dybvig (1983), is a barrier to full insurance and potential source offinancial fragility against which deposit insurance is infeasible (Wallace,1988). In this paper, we pursue a different perspective, viewingthe sequence of contacts as opportunities to extract informationthrough a larger message space with commitment to richer promises.As we show, if preferences satisfy a separating property then the desiredelimination of dominated strategies (Green and Lin, 2003) occurseven when shocks are correlated. In this manner the sequential servicepromotes stability.

Stationarity without Degeneracy in a Model of Commodity Money

We develop a model of macroeconomic heterogeneity inspired by the Kiyotaki-Wright (1989) formulation of commodity money, with the addition of linear utility and idiosyncratic shocks to savings. We consider two environments. In the benchmark case, the consumer in a meeting is chosen randomly. In the auctions case, the individual holding more money can be selected to be the consumer. We show that in both environments socially optimal trading decisions (that are individually acceptable) are stationary and solve a tractable static op- timization problem. Savings decisions in the benchmark case are re- markably invariant to mean-preserving changes in the distribution of shocks. This result is overturned in the auctions case.Macroeconomics with heterogeneous savings; commodity money with linear adjustments; mechanism design; auctions

Some benefits of cyclical monetary policy

In this paper, we present a simple random-matching model in which different seasons translate into different propensities to consume and produce. We find that the cyclical creation and destruction of money is beneficial for welfare under a wide variety of circumstances. Our model of seasons can be interpreted as providing support for the creation of the Federal Reserve System, with its mandate of supplying an elastic currency for the nation.Monetary policy ; Money supply

Las muchas naturalezas en los Andes

Si en el Occidente moderno la noción de naturaleza se conforma en contraposición lógica a la noción de cultura, las disposiciones semánticas de una y otra categoría conforman, de su parte, una específica ecología del pensamiento. Lo que planteamos en el presente artículo es que esta conformación puede no ser aplicable en otros sistemas de pensamiento. Para esto, tomamos como caso de confrontación la cosmología andina y acercamos a sus referentes una interpretación etnológica de inspiración amazonista que no le suele ser usual.In modern Western thought the idea of nature is constructed in logical opposition to the idea of culture, and with their semantic contents they constitute a specific ecology of mind. I argue here that this arrangement can not necessarily be applicable to others systems of thought. For this purpose I take the case of Andean cosmology and I submit it to an analytical treatment inspired by the "multiculturalistic" thesis from Amazonian ethnology

Relativizando la historicidad. Memoria social, cosmología y tiempo en los Andes

En la región de Tarabuco (Andes meridionales bolivianos), la memoria histórica de la gente originaria quechua-hablante no va más allá de lo que se acuerdan las generaciones vivas. El tiempo de los ancestros pertenece a otro mundo y no comparte la misma naturaleza de este mundo presente. Sin embargo, el reconocimiento de la continuidad de la existencia está enmarcado por otra pauta que no la causalidad factual o la transformación histórica, sino que la renovación permanente de los acuerdos entre las potencias dispensadas por los muchos sujetos del cosmos. Los regímenes textuales que expresan esta clase de memoria se organizan acorde una misma lógica formal: la complementariedad de mitades asimétricas. Acorde esta sintaxis, el pasado es complementario al presente, el mundo este es complementario al mundo de los ancestros, ambos son coetáneos y coextensivos, y es el consorcio de sus potencias que hace posible la reproducción de la vida. Frente a esto, lo que finalmente los andinos nos sugieren en términos conceptuales es el desplazamiento de la historicidad del lugar cognoscitivo de universal, para poner en su lugar un concepto más general de memoria, por el que la historicidad pasa a ser tan sólo uno de sus modos posibles. Palabras clave: memoria social, cosmología, textualidad, Andes, Tarabuco Abstract In the Tarabuco region of the southern Bolivian Andes, the historical memory of native Quechua-speaking people goes no farther back than what living generations remember. The time of the ancestors belongs to another world and is not of the same nature as that of the present world. However, recognition of the continuity of existence is framed by a pattern, not that of factual causality or historical transformation, but the permanent renewal of agreements between the powers of the many agents of the cosmos. Textual regimes that express this kind of memory are organized according to the same formal logic: the complementarity of asymmetric halves. According to this syntax, the past is complementary to the present, and this world is complementary to the world of the ancestors. Both are contemporary and coextensive, and it is the consortium of their powers that makes possible the reproduction of life. What this Andean cosmology suggests in conceptual terms is that historicity as a universal way of knowing is displaced by a more general concept of memory, of which historicity is only one of its possible modes. Keywords: social memory, cosmology, textuality, Andes, Tarabuc

Liquidity, money creation and destruction, and the returns to banking

We build on our earlier model of money in which bank liabilities circulate as medium of exchange, and investigate the provision of liquidity for a range of central-bank regulations dealing with the potential of bank failure. In our model, banks issue inside money under fractional reserves, facing the event of excess redemptions. They monitor the float of their money issue and make reserve-management decisions which affect aggregate liquidity conditions. Numerical examples demonstrate bank failure when returns to banking are low. Central-bank interventions, injecting more funds or making interest payments proportional to holdings of reserves, may improve banks’ returns and society’s welfare, followed by a reduction in bank failure. JEL Classification: E4, E5liquidity, private money creation

Private money and reserve management in a random-matching model

In this paper, we develop a model of money and reserve-holding banks. We allow for private liabilities to circulate as media of exchange in a random-matching framework. Some individuals, which we identify as banks, are endowed with a technology to issue private notes and to keep reserves with a clearinghouse. Bank liabilities are redeemed according to a stochastic process that depends on the endogenous trades. We find conditions under which note redemptions act as a force that is sufficient to stabilize note issue by the banking sector.Banks and banking ; Bank notes ; Intermediation (Finance)

A note on convergence of Peck-Shell and Green-Lin mechanisms in the Diamond-Dybvig model

We study the e¤ects of population size in the Peck-Shell analysis ofbank runs. We nd that a contract featuring equal-treatment for al-most all depositors of the same type approximates the optimum. Becausethe approximation also satis es Green-Lin incentive constraints, when theplanner discloses positions in the queue, welfare in these alternative spec-i cations are sandwiched. Disclosure, however, is not needed since ourapproximating contract is not subject to runs.keywords: bank fragility, role of population size, role of aggregate uncer-tainty