An Idealized View of Financial Intermediation
Using the monetary model developed in Sissoko (2007), where the general equilibrium assumption that every agent buys and sells simultaneously is relaxed, we observe that in this environment fiat money can implement a Pareto optimum only if taxes are type-specific. We then consider intermediated money by assuming that financial intermediaries whose liabilities circulate as money have an important identifying characteristic: they are widely viewed as default-free. The paper demonstrates that default-free intermediaries who issue credit lines to consumers can resolve the monetary problem and make it possible for the economy to reach a Pareto optimum. We argue that our idealized concept of financial intermediation is a starting point for studying the monetary use of credit.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 431 8814-1
Fax: +49 431 8814528
Web page: http://www.economics-ejournal.org/
More information through EDIRC
References listed on IDEAS
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.:
- Mills, David C., 2007.
"A Model In Which Outside And Inside Money Are Essential,"
Cambridge University Press, vol. 11(03), pages 347-366, June.
- David C. Mills, Jr., 2006. "A model in which outside and inside money are essential," Finance and Economics Discussion Series 2006-38, Board of Governors of the Federal Reserve System (U.S.).
- Kehoe, Timothy J & Levine, David K, 1993.
"Debt-Constrained Asset Markets,"
Review of Economic Studies,
Wiley Blackwell, vol. 60(4), pages 865-88, October.
- Ricardo de O. Cavalcanti & Neil Wallace, 1999.
"Inside and outside money as alternative media of exchange,"
Federal Reserve Bank of Cleveland, pages 443-468.
- Cavalcanti, Ricardo de O & Wallace, Neil, 1999. "Inside and Outside Money as Alternative Media of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 443-57, August.
- Carolyn Sissoko, 2007. "Why Inside Money Matters," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 2097-2105, December.
- Bulow, J. & Rogoff, K., 1988.
"Sovereign Debt: Is To Forgive To Forget?,"
411, Stockholm - International Economic Studies.
- Stephen D. Williamson, 1999.
Federal Reserve Bank of Cleveland, pages 469-499.
- Aleksander Berentsen & Gabriele Camera, 2004.
"Money, Credit, and Banking,"
2004 Meeting Papers
473, Society for Economic Dynamics.
- Aleksander Berentsen & Gabriele Camera & Christopher Waller, . "Money, Credit and Banking," IEW - Working Papers 219, Institute for Empirical Research in Economics - University of Zurich.
- Aleksander Berentsen & Gabriele Camera & Christopher Waller, 2005. "Money, Credit and Banking," CESifo Working Paper Series 1617, CESifo Group Munich.
- James Bullard & Bruce D. Smith, 2001.
"The value of inside and outside money,"
2000-027, Federal Reserve Bank of St. Louis.
- Edward J. Green & Ruilin Zhou, 2002.
"Money as a mechanism in a Bewley economy,"
Working Paper Series
WP-02-15, Federal Reserve Bank of Chicago.
- 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.
- Brock, William A., 1975. "A simple perfect foresight monetary model," Journal of Monetary Economics, Elsevier, vol. 1(2), pages 133-150, April.
- Neil Wallace, 1998. "A dictum for monetary theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 20-26.
- Joydeep Bhattacharya & Joseph H. Haslag & Antoine Martin, 2004.
"Heterogeneity, redistribution, and the Friedman rule,"
Research Working Paper
RWP 04-01, Federal Reserve Bank of Kansas City.
- Joydeep Bhattacharya & Joseph H. Haslag & Antoine Martin, 2005. "Heterogeneity, Redistribution, And The Friedman Rule," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 437-454, 05.
- Bhattacharya, Joydeep & Haslag, Joseph & Martin, Antoine, 2004. "Heterogeneity, Redistribution, and the Friedman Rule," Staff General Research Papers 11371, Iowa State University, Department of Economics.
- Stephen Williamson, 2004. "Limited participation, private money, and credit in a spatial model of money," Economic Theory, Springer, vol. 24(4), pages 857-875, November.
- Ricardo de O. Cavalcanti & Neil Wallace, 1999. "A model of private bank-note issue," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 104-136, January.
- Narayana R. Kocherlakota, 2002. "Money: What's the Question and Why Should We Care About the Answer?," American Economic Review, American Economic Association, vol. 92(2), pages 58-61, May.
When requesting a correction, please mention this item's handle: RePEc:zbw:ifwedp:5530. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.