Understanding intraday credit in large-value payment systems

This article explains how large-value payment systems work, using either gross or net settlement. The author discusses risk control in a real-time gross settlement system and analyzes the pricing of credit to provide intraday liquidity. She argues for distinguishing between consumption/investment debt and payment debt. A theoretical model suggests that, under the assumption that there are no opportunities for intraday optimization of consumption and production, the risk-free rate on intraday payment credit should be zero. This is because the cost of intraday liquidity is a transaction cost of the underlying goods/assets trade and, thus, should be minimized.Payment systems ; Credit ; Debt ; Liquidity (Economics)

Individual and aggregate real balances in a random matching model

This paper investigates the characteristics of stationary single-price equilibrium in a monetary random-matching model where agents can hold an arbitrary amount of divisible money and where production is costly. At such an equilibrium, agents’ money holdings are endogenously determined and uniformly bounded. A refinement of weakly undominated strategies is argued to be necessary. It is shown that a continuum of single-price equilibria indexed by the aggregate real-money balance exists if one such equilibrium exists. Equilibria with different money-holdings upper bounds, hence different distributions, but with identical aggregate real-money balances, can coexist.Money theory ; Prices

A stable money demand: Looking for the right monetary aggregate

A money demand relationship with M1 as the monetary aggregate holds very well until the mid-1980s but not well after that. This could be because the demand for money is not a stable relationship. The authors' conclusion is that the measure of money is not a stable measure. Technological innovation and changes in regulatory practices in the past two decades have made other monetary aggregates as liquid as M1. Once an appropriately adjusted measure of money is taken into consideration, the stability of money demand is recovered.Money ; Money supply

Money as a mechanism in a Bewley economy

We study what features an economic environment might possess, such that it would be Pareto efficient for the exchange of goods in that environment to be conducted on spot markets where those goods trade for money. We prove a conjecture that is essentially due to Bewley [1980,1983]. Monetary spot trading is nearly efficient when there is only a single perishable good (or a composite commodity) at each date and state of the world; random shocks are idiosyncratic, privately observed, and temporary; markets are competitive; and the agents are very patient. This result is a fairly close analogue, for trade using outside, fiat money, of a recent characterization by Levine and Zame [2002] of environments in which spot trade using inside money, in the form of one-period debt payable in a commodity, is nearly Pareto efficient. We also study a example where expansionary monetary mechanism Pareto dominates laissez-faire or contractionary monetary mechanism in an environment with impatient agents.Money ; Monetary theory

Equilibrium Lending Mechanism and Aggregate Activity

What determines the firm's choice of its mechanism of investment financing? How is the choice of the firm's financing mechanism at the micro level related to the economy's business cycle movements at the aggregate level? This paper develops a model of the credit market where the equilibrium lending mechanism, as well as the economy's aggregate investment and output, are endogenously determined. Among other things, our model predicts that a negative productivity shock can cause an economic downturn that is accompanied not only by a contraction in total outstanding loans, but also by a decline in the ratio of bank loans to non-bank lending, as observed in the 1990-91 U.S. recession.

When can we forecast inflation?

This article reassesses recent work that has challenged the usefulness of inflation forecasts. The authors find that inflation forecasts were informative in 1977-84 and 1993-2000, but less informative in 1985-92. They also find that standard forecasting models, while generally poor at forecasting the magnitude of inflation, are good at forecasting the direction of change of inflation.Inflation (Finance) ; Phillips curve

Equilibrium lending mechanism and aggregate activity

This paper develops a model of the credit market where the equilibrium lending mechanism, as well as the economy's aggregate investment and output, are endogenously determined. It focuses on two crucial elements. One is the micro theory of optimal lending mechanism. Instead of imposing a particular lending contract form exogenously, we solve for the optimal contract between a borrower and a lender designed to circumvent adverse-selection and moral-hazard problems in the model environment. The other important element is the effect of credit market condition on the lending mechanism. We embed the micro model of the two-agent contracting problem into a competitive credit market. Hence, we are able to study the interaction among credit market tightness, equilibrium financing mechanism and aggregate economic activity.> On the optimal contract, the paper provides a formal theory that explains why some firms choose to borrow from banks, while others decide to issue bond to finance their investment. It postulates that the optimal contract is one of two kinds: either with intensive monitoring by the lender to overcome borrower's incentive problems, such as most of intermediated financing (bank or venture-capital financing), or with heavy reliance on the borrower, such as market financing. The model predicts that intermediated financing is optimal when investment returns are high, cost of lender monitoring is low, investment's liquidation value is low, and credit market is tight for the borrowers.> On the general equilibrium effect, we show that the observation that bank lending falls relative to corporate bond issuance during recessions can be explained by movements in the economy's real factors, such as the decline in the average investment returns (which is considered as a contributing factor to the ``credit crunch'' occurred during 1990-91 recession), and paradoxically, the increase of investment demand which worsens credit market condition and hence intensifies the incentive problems. It can also be explained by the drop of credit supply, possibly brought about by a contractionary monetary policy in the short run.Bank loans ; Loans

Applications for Drowning Identification by Planktonic Diatom Test on Rats in Forensic Medicine

AbstractWe established a model of drowning, and by investigating diatoms in lung, liver, kidney, and long bone marrow of rats at different time to discuss the cause of death. The organs of 35 rats were extracted 0.5h, 1h, 6h, 12h, 24h and 48h after drowning and the organs of sham-drowning group killed by mechanical asphyxia were extracted 1h after body immersed in water. The organs were digested by acid, and the diatoms were analyzed by statistics. Results shown the detection rate was 100% in lung, and the positive rate of all the extracted organs was 100% 6hours after drowning except the sham-drowning group. No diatoms were detected in the liver, kidney and bone marrow of the sham-drowning group, just only one case was positive in the lung. So it is concluded that the detection rate of diatoms could be considered as important evidence in drowning determination

Mitochondrial Dysfunction-Associated Arrhythmogenic Substrates in Diabetes Mellitus

There is increasing evidence that diabetic cardiomyopathy increases the risk of cardiac arrhythmia and sudden cardiac death. While the detailed mechanisms remain incompletely understood, the loss of mitochondrial function, which is often observed in the heart of patients with diabetes, has emerged as a key contributor to the arrhythmogenic substrates. In this mini review, the pathophysiology of mitochondrial dysfunction in diabetes mellitus is explored in detail, followed by descriptions of several mechanisms potentially linking mitochondria to arrhythmogenesis in the context of diabetic cardiomyopathy