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Credit Cards and Inflation
Geanakoplos, John; Dubey, Pradeep - Cowles Foundation for Research in Economics, Yale University - 2009
The introduction and widespread use of credit cards increases trading efficiency but, by also increasing the velocity of money, it causes inflation, in the absence of monetary intervention. If the monetary authority attempts to restore pre-credit card price levels by reducing the money supply,...
Persistent link: https://www.econbiz.de/10005016204
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The Ideal Inflation Indexed Bond and Irving Fisher's Impatience Theory of Interest in an Overlapping Generations World
Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2003
ideal commodity bundle. Irving Fisher also developed and advocated the impatience theory of interest. But in OLG economies …, the rate of interest is determined by population growth, not impatience. I reconcile this contradiction by proving that in … stationary OLG economies with land, the interest rate at the unique steady state does depend on impatience. Indeed, the …
Persistent link: https://www.econbiz.de/10005761445
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If You're So Smart, Why Aren't You Rich? Belief Selection in Complete and Incomplete Markets
Blume, Larry; Easley, David - Cowles Foundation for Research in Economics, Yale University - 2001
This paper provides an analysis of the asymptotic properties of consumption allocations in a stochastic general equilibrium model with heterogeneous consumers. In particular we investigate the market selection hypothesis, that markets favor traders with more accurate beliefs. We show that in any...
Persistent link: https://www.econbiz.de/10005762721
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Leverage and Default in Binomial Economies: A Complete Characterization
Fostel, Ana; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2012
Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. Our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and prices) to another equilibrium in which there is no...
Persistent link: https://www.econbiz.de/10010886156
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Greek Debt and American Debt: Graduation Speech at the University of Athens Economics and Business School
Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2011
This is the graduation speech I gave on receiving an honorary doctorate at the University of Athens Economics and Business School. I talk about my Greek family, about how I got interested in economics, and then how in the 1990s I came to think about default, collateral, and leverage as the...
Persistent link: https://www.econbiz.de/10009368555
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Tranching, CDS and Asset Prices: How Financial Innovation Can Cause Bubbles and Crashes
Fostel, Ana; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2011
We show how the timing of financial innovation might have contributed to the mortgage bubble and then to the crash of 2007-2009. We show why tranching and leverage first raised asset prices and why CDS lowered them afterwards. This may seem puzzling, since it implies that creating a derivative...
Persistent link: https://www.econbiz.de/10009251217
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Why Does Bad News Increase Volatility and Decrease Leverage?
Fostel, Ana; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2010
A recent literature shows how an increase in volatility reduces leverage. However, in order to explain pro-cyclical leverage it assumes that bad news increases volatility, that is, it assumes an inverse relationship between first and second moments of asset returns. This paper suggests a reason...
Persistent link: https://www.econbiz.de/10009251219
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Tranching, CDS and Asset Prices: How Financial Innovation Can Cause Bubbles and Crashes
Fostel, Ana; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2011
We show how the timing of financial innovation might have contributed to the mortgage boom and then to the bust of 2007-2009. We study the effect of leverage, tranching, securitization and CDS on asset prices in a general equilibrium model with collateral. We show why tranching and leverage tend...
Persistent link: https://www.econbiz.de/10009207365
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Endogenous Leverage in a Binomial Economy: The Irrelevance of Actual Default
Fostel, Ana; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2012
We show that binomial economies with financial assets are an informative and tractable model to study endogenous leverage and collateral equilibrium: endogenous leverage can be highly volatile, but it is always easy to compute. The possibility of default can have a dramatic effect on...
Persistent link: https://www.econbiz.de/10010686935
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Endogenous Leverage: VaR and Beyond
Fostel, Ana; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2011
We study endogenous leverage in a general equilibrium model with incomplete markets. We prove that in any binary tree leverage emerges in equilibrium at the maximum level such that VaR = 0, so there is no default in equilibrium, provided that agents get no utility from holding the collateral....
Persistent link: https://www.econbiz.de/10009018061