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Money and Nominal Bonds

Author

Listed:
  • Pietro Senesi

    (University of Naples L'Orientale)

  • Alessandro Marchesiani

    (University of Rome Telma)

Abstract

This paper studies an economy with trading frictions, ex post heterogeneity and outside bonds in a model a' la Lagos and Wright [14]. It is shown that nominal bonds help to reduce the inefficiency due to the fact that, depending on the population distribution between buyers and sellers, a non-zero measure set of agents hold idle money.

Suggested Citation

  • Pietro Senesi & Alessandro Marchesiani, 2007. "Money and Nominal Bonds," 2007 Meeting Papers 835, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:835
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    References listed on IDEAS

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    1. Aleksander Berentsen & Gabriele Camera & C hristopher W aller, 2005. "The Distribution Of Money Balances And The Nonneutrality Of Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 465-487, May.
    2. Levine, David K., 1991. "Asset trading mechanisms and expansionary policy," Journal of Economic Theory, Elsevier, vol. 54(1), pages 148-164, June.
    3. Edward J. Green & Ruilin Zhou, 2005. "Money As A Mechanism In A Bewley Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 351-371, May.
    4. Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
    5. Ricardo de O. Cavalcanti & Andres Erosa & Ted Temzelides, 1999. "Private Money and Reserve Management in a Random-Matching Model," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 929-945, October.
    6. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "Inside and outside money as alternative media of exchange," Proceedings, Federal Reserve Bank of Cleveland, pages 443-468.
    7. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
    8. Shouyong Shi, 1996. "Credit and Money in a Search Model with Divisible Commodities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(4), pages 627-652.
    9. Guillaume Rocheteau & Randall Wright, 2005. "Money in Search Equilibrium, in Competitive Equilibrium, and in Competitive Search Equilibrium," Econometrica, Econometric Society, vol. 73(1), pages 175-202, January.
    10. Zhu, Tao & Wallace, Neil, 2007. "Pairwise trade and coexistence of money and higher-return assets," Journal of Economic Theory, Elsevier, vol. 133(1), pages 524-535, March.
    11. Boel, Paola & Camera, Gabriele, 2006. "Efficient monetary allocations and the illiquidity of bonds," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1693-1715, October.
    12. Aleksander Berentsen & Guillaume Rocheteau & Shouyong Shi, 2007. "Friedman Meets Hosios: Efficiency in Search Models of Money," Economic Journal, Royal Economic Society, vol. 117(516), pages 174-195, January.
    13. Berentsen, Aleksander & Camera, Gabriele & Waller, Christopher, 2007. "Money, credit and banking," Journal of Economic Theory, Elsevier, vol. 135(1), pages 171-195, July.
    14. Aleksander Berentsen & Christopher Waller, 2005. "Optimal Stabilization Policy with Flexible Prices," CESifo Working Paper Series 1638, CESifo.
    15. Christopher Waller & Aleksander Berentsen, 2007. "The Societal Benefits of Outside versus Inside Bonds," 2007 Meeting Papers 110, Society for Economic Dynamics.
    16. Ping He & Lixin Huang & Randall Wright, 2005. "Money And Banking In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 637-670, May.
    17. Li, Victor E, 1995. "The Optimal Taxation of Fiat Money in Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 927-942, November.
    18. Li, Victor E, 1997. "The Efficiency of Monetary Exchange in Search Equilibrium," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 61-72, February.
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    Cited by:

    1. Berentsen, Aleksander & Waller, Christopher, 2011. "Outside versus inside bonds: A ModiglianiâMiller type result for liquidity constrained economies," Journal of Economic Theory, Elsevier, vol. 146(5), pages 1852-1887, September.
    2. Kim, Young Sik & Lee, Manjong, 2012. "Intermediary cost and coexistence puzzle," Economics Letters, Elsevier, vol. 117(1), pages 142-145.
    3. Aleksander Berentsen & Christopher Waller, 2008. "Outside Versus Inside Bonds," IEW - Working Papers 372, Institute for Empirical Research in Economics - University of Zurich.

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    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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