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Self-Insurance and the Risk-Sharing Role of Money

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  • Russell Wong

Abstract

Overcoming the lack of coincidence of wants is a well-acknowledged role of money. In this review, I illustrate that the use of money also promotes risk-sharing in the society: when individuals hold money, it helps other individuals mitigate their own liquidity risks.

Suggested Citation

  • Russell Wong, 2018. "Self-Insurance and the Risk-Sharing Role of Money," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 35-52.
    • Handle: RePEc:fip:fedreq:00057
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    References listed on IDEAS

    as
    1. Guillaume Rocheteau & Pierre-Olivier Weill & Tsz-Nga Wong, 2015. "Working through the Distribution: Money in the Short and Long Run," NBER Working Papers 21779, National Bureau of Economic Research, Inc.
    2. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 659-684.
    3. Lippi, Francesco & Ragni, Stefania & Trachter, Nicholas, 2015. "Optimal monetary policy with heterogeneous money holdings," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 339-368.
    4. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    5. Nosal, Ed & Rocheteau, Guillaume, 2011. "Money, Payments, and Liquidity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262016281, December.
    Full references (including those not matched with items on IDEAS)

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