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Money and competing assets under private information

  • Guillaume Rocheteau

I study random-matching economies where at money coexists with real assets, and no restrictions are imposed on payment arrangements. I emphasize informational asymmetries about asset fundamentals to explain the partial illiquidity of real assets and the usefulness of at money. The liquidity of the real asset, as measured by its transaction velocity, is shown to depend on the discrepancy of its dividend across states as well as policy. I analyze how monetary policy affects payment arrangements, asset prices, and welfare.

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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0802.

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Date of creation: 2008
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Handle: RePEc:fip:fedcwp:0802
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