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Payments Systems with Random Matching and Private Information

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Author Info

  • Williamson, Stephen

    ()
    (University of Iowa)

Abstract

A model of dynamic risk-sharing is constructed where agents meet pairwise and at random, and there is private information about endowments. Risk sharing is accomplished through dynamic contracts involving credit transactions, and through monetary exchange. A Friedman rule is optimal, and solutions are computed. The welfare costs of inflation and the effects of inflation on the distribution of consumptions and wealth are small for an economy calibrated to U.S. data. However, these effects are large when the credit system is relatively unsophisticated.

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Bibliographic Info

Paper provided by University of Iowa, Department of Economics in its series Working Papers with number 97-21.

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Length: 36 Pages
Date of creation: Sep 1997
Date of revision:
Handle: RePEc:uia:iowaec:97-21

Contact details of provider:
Postal: University of Iowa, Department of Economics, Henry B. Tippie College of Business, Iowa City, Iowa 52242
Phone: (319) 335-0829
Fax: (319) 335-1956
Web page: http://tippie.uiowa.edu/economics/
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Related research

Keywords: Money; Payments; Credit; Private Information;

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References

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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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  1. Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
  2. S. Rao Aiyagari & Stephen D. Williamson, 1997. "Credit in a Random Matching Model With Private Information," Game Theory and Information 9705005, EconWPA.
  3. S. Rao Aiyagari & Stephen D. Williamson, 1998. "Money, Credit, and Allocation Under Complete Dynamic Contracts and Incomplete Markets," Game Theory and Information 9802003, EconWPA.
  4. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-41, February.
  5. Christopher Phelan & Robert M Townsend, 2010. "Computing Multi-Period, Information Constrained Optima," Levine's Working Paper Archive 117, David K. Levine.
  6. Narayana R. Kocherlakota & Neil Wallace, 1997. "Optimal allocations with incomplete record-keeping and no commitment," Working Papers 578, Federal Reserve Bank of Minneapolis.
  7. Atkeson Andrew & Lucas Jr. , Robert E., 1995. "Efficiency and Equality in a Simple Model of Efficient Unemployment Insurance," Journal of Economic Theory, Elsevier, vol. 66(1), pages 64-88, June.
  8. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  9. Michael Dotsey & Peter Ireland, 1994. "The welfare cost of inflation in general equilibrium," Working Paper 94-04, Federal Reserve Bank of Richmond.
  10. Freeman, Scott, 1996. "The Payments System, Liquidity, and Rediscounting," American Economic Review, American Economic Association, vol. 86(5), pages 1126-38, December.
  11. Aiyagari, S. Rao & Williamson, Stephen D., 2000. "Money and Dynamic Credit Arrangements with Private Information," Journal of Economic Theory, Elsevier, vol. 91(2), pages 248-279, April.
  12. Andrew Atkeson & Robert E Lucas, 2010. "On Efficient Distribution with Private Information," Levine's Working Paper Archive 2179, David K. Levine.
  13. Freeman, Scott, 1999. "Rediscounting under aggregate risk," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 197-216, February.
  14. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
  15. Lacker, Jeffrey M. & Schreft, Stacey L., 1996. "Money and credit as means of payment," Journal of Monetary Economics, Elsevier, vol. 38(1), pages 3-23, August.
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Citations

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Cited by:
  1. S. Rao Aiyagari & Stephen D. Williamson, 1997. "Credit in a Random Matching Model With Private Information," Game Theory and Information 9705005, EconWPA.
  2. Ed Nosal & Guillaume Rocheteau, 2006. "The economics of payments," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Feb.
  3. Stephen Williamson, 2000. "The Research Agenda: Payment Systems and Private Money," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 2(1), November.
  4. Williamson, Stephen D., 2003. "Payments systems and monetary policy," Journal of Monetary Economics, Elsevier, vol. 50(2), pages 475-495, March.
  5. Temzelides, Ted & Williamson, Stephen D., 2001. "Payments Systems Design in Deterministic and Private Information Environments," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 297-326, July.
  6. Li, Shuyun May, 2013. "Optimal lending contracts with long run borrowing constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 964-983.

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