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A Stochastic Infinite-Horizon Economy with Secured Lending or Unsecured Lending and Bankruptcy

  • I. Karatzas
  • M. Shubik
  • W. Sudderth

Modeling problems for a monetary economy are discussed and some examples are presented in the context of an infinite-horizon economy with one or two types of traders, who use fiat money to buy a single perishable consumption good. Three instances are considered, all with transactions in fiat money. The first model has no borrowing or lending. The second model permits both borrowing and lending, but all loans are secured. The third model has borrowing and unsecured lending, and takes into account the presence of debtors who are unable to honor their debts and go bankrupt. Borrowing and depositing take place through an outside bank, although in some circumstances a money market could be used instead. Conditions for different forms of lending are discussed. This is a survey of three technical papers, where the mathematical models are developed in detail and the proofs are supplied.

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Paper provided by Santa Fe Institute in its series Working Papers with number 97-12-093.

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Date of creation: Dec 1997
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Handle: RePEc:wop:safiwp:97-12-093
Contact details of provider: Postal: 1399 Hyde Park Road, Santa Fe, New Mexico 87501
Web page: http://www.santafe.edu/sfi/publications/working-papers.html

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  1. Karatzas, Ioannis & Shubik, Martin & Sudderth, William D., 1997. "A strategic market game with secured lending," Journal of Mathematical Economics, Elsevier, vol. 28(2), pages 207-247, September.
  2. Martin Shubik, 2000. "The Theory of Money," Working Papers 00-03-021, Santa Fe Institute.
  3. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
  4. J. Geanakoplos & I. Karatzas & M. Shubik & W. Sudderth, 1999. "A Strategic Market Game with Active Bankruptcy," Working Papers 99-04-025, Santa Fe Institute.
  5. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-68, October.
  6. Martin Shubik & Shuntian Yao, 1989. "Gold, Liquidity and Secured Loans in a Multi-Stage Economy. Part II. Many Durables, Land and Gold," Cowles Foundation Discussion Papers 904, Cowles Foundation for Research in Economics, Yale University.
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