Essential Interest-Bearing Money
AbstractIn this paper, I provide a rationale for why money should earn interest; or, what amounts to the same thing, why risk-free claims to non-interestbearing money should trade at discount. I argue that interest-bearing money is essential when individual money balances are private information. The analysis also suggests one reason for why it is sufficient (as well as necessary) for interest to be paid only on large money balances; or equivalently, why bonds need only be issued in large denominations.
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Bibliographic InfoPaper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp07-16.
Length: 14 pages
Date of creation: Sep 2007
Date of revision:
Contact details of provider:
Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
Web page: http://www.sfu.ca/economics.html
More information through EDIRC
Postal: Working Paper Coordinator, Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
Other versions of this item:
- David Andolfatto, 2008. "Essential Interest-Bearing Money," EIEF Working Papers Series 0802, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2008.
- Andolfatto, David, 2007. "Essential Interest-Bearing Money," MPRA Paper 4780, University Library of Munich, Germany.
- David Andolfatto, 2009. "Essential interest-bearing money," Working Papers 2009-044, Federal Reserve Bank of St. Louis.
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-30 (All new papers)
- NEP-CBA-2007-09-30 (Central Banking)
- NEP-DGE-2007-09-30 (Dynamic General Equilibrium)
- NEP-MAC-2007-09-30 (Macroeconomics)
- NEP-MON-2007-09-30 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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0211, Federal Reserve Bank of Cleveland.
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- Ricardo Lagos & Randall Wright, 2004. "A unified framework for monetary theory and policy analysis," Staff Report 346, Federal Reserve Bank of Minneapolis.
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