Societal benefits of nominal bonds
In this paper, I provide a possible explanation of why nominally risk-free bonds are essential in monetary economies. I argue that the role of nominal bonds is to serve as record-keeping devices in intertemporal exchanges of money. I show that bonds can only serve this role if they are illiquid (costly to exchange for goods). Finally, I show that in economies in which nominal bonds are essential, welfare and nominal interest rates are both positively associated with the supply of illiquid bonds (if that supply is small).
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Postal: 90 Hennepin Avenue, P.O. Box 291, Minneapolis, MN 55480-0291|
Phone: (612) 204-5000
Web page: http://minneapolisfed.org/
More information through EDIRC
|Order Information:|| Web: http://www.minneapolisfed.org/pubs/ Email: |
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.:
- Townsend, Robert M, 1989. "Currency and Credit in a Private Information Economy," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1323-44, December.
- Harold L Cole & Narayana Kocherlakota, 2010.
"Efficient Allocations with Hidden Income and Hidden Storage,"
Levine's Working Paper Archive
1909, David K. Levine.
- Harold L. Cole & Narayana R. Kocherlakota, 2001. "Efficient Allocations with Hidden Income and Hidden Storage," Review of Economic Studies, Oxford University Press, vol. 68(3), pages 523-542.
- Harold L. Cole & Narayana R. Kocherlakota, 1999. "Efficient allocations with hidden income and hidden storage," Staff Report 238, Federal Reserve Bank of Minneapolis.
- Nobuhiro Kiyotaki & Randall Wright, 1989.
"A contribution to the pure theory of money,"
123, Federal Reserve Bank of Minneapolis.
- S. Rao Aiyagari & Neil Wallace & Randall Wright, 1996.
"Coexistence of money and interest-bearing securities,"
550, Federal Reserve Bank of Minneapolis.
- Rao Aiyagari, S. & Wallace, Neil & Wright, Randall, 1996. "Coexistence of money and interest-bearing securities," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 397-419, June.
- Kocherlakota, Narayana R., 1998.
"Money Is Memory,"
Journal of Economic Theory,
Elsevier, vol. 81(2), pages 232-251, August.
- Mark Huggett & Stefan Krasa, 1996.
"Money and storage in a differential information economy (*),"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 191-209.
- Huggett, Mark & Krasa, Stefan, 1996. "Money and Storage in a Differential Information Economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 191-210, August.
- Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
- David K. Levine, 1991.
"Asset Trading Mechanisms and Expansionary Policy,"
Levine's Working Paper Archive
43, David K. Levine.
When requesting a correction, please mention this item's handle: RePEc:fip:fedmsr:275. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Janelle Ruswick)
If references are entirely missing, you can add them using this form.