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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
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
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
Financial innovations that change how promises are collateralized can affect investment, even in the absence of any change in fundamentals. In C-models, the ability to leverage an asset always generates over-investment compared to Arrow Debreu. The introduction of CDS always leads to...
Persistent link: https://www.econbiz.de/10011196013
We show that financial innovations that change the collateral capacity of assets in the economy can affect investment even in the absence of any shift in utilities, productivity, or asset payoffs. First we show that the ability to leverage an asset by selling non-contingent promises can generate...
Persistent link: https://www.econbiz.de/10011196014
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/10011196017
Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. First, 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/10010895644
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
We discuss how leverage can be monitored for institutions, individuals, and assets. While traditionally the interest rate has been regarded as the important feature of a loan, we argue that leverage is sometimes even more important. Monitoring leverage provides information about how risk builds...
Persistent link: https://www.econbiz.de/10009371330
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