Money and Loans
AbstractAgents expect to trade with each other infinitely often, but face a temporal absence of a coincidence of wants when they meet. Only loans and/or money can facilitate exchange. In small close-knit economies, enduring trade relationships are valued and loans are optimal. In larger economies, information concerning repayment of loans diffuses too slowly to deter agents from reneging unless loans are severely restricted in magnitude. Money has no such redeemability problems, but if Clower constraints bind, loans help supplement money purchases so that both become essential. Roles of various institutions and the historical evolution of media exchange are explained. Copyright 1989 by The Review of Economic Studies Limited.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Economic Studies.
Volume (Year): 56 (1989)
Issue (Month): 1 (January)
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- Wang, Yong & Zhou, Hanqing, 2001. "Money and credit in liquidity provision," Journal of Banking & Finance, Elsevier, vol. 25(11), pages 2041-2067, November.
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