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Negative Nominal Interest Rates: Three ways to overcome the zero lower bound
Buiter, Willem Hendrik - National Bureau of Economic Research (NBER) - 2009
The paper considers three methods for eliminating the zero lower bound on nominal interest rates and thus for restoring symmetry to domain over which the central bank can vary its policy rate. They are: (1) abolishing currency (which would also be a useful crime-fighting measure); (2) paying...
Persistent link: https://www.econbiz.de/10005036814
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Persistent Liquidity Effects and Long Run Money Demand
Alvarez, Fernando E.; Lippi, Francesco - National Bureau of Economic Research (NBER) - 2011
We present a monetary model in the presence of segmented asset markets that implies a persistent fall in interest rates after a once and for all increase in liquidity. The gradual propagation mechanism produced by our model is novel in the literature. We provide an analytical characterization of...
Persistent link: https://www.econbiz.de/10009359892
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The Supply and Demand for Safe Assets
Gorton, Gary; Ordonez, Guillermo L. - National Bureau of Economic Research (NBER) - 2013
There is a demand for safe assets, either government bonds or private substitutes, for use as collateral. Government bonds are safe assets, given the government's power to tax, but their supply is driven by fiscal considerations, and does not necessarily meet the private demand for safe assets....
Persistent link: https://www.econbiz.de/10010969335
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Financial Innovation and the Transactions Demand for Cash
Alvarez, Fernando E.; Lippi, Francesco - National Bureau of Economic Research (NBER) - 2007
We document cash management patterns for households that are at odds with the predictions of deterministic inventory … models that abstract from precautionary motives. We extend the Baumol-Tobin cash inventory model to a dynamic environment … that allows for the possibility of withdrawing cash at random times at a low cost. This modification introduces a …
Persistent link: https://www.econbiz.de/10005050066
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Liquidity and the Threat of Fraudulent Assets
Weill, Pierre-Olivier; Li, Yiting; Rocheteau, Guillaume - National Bureau of Economic Research (NBER) - 2011
We study an over-the-counter (OTC) market with bilateral meetings and bargaining where the usefulness of assets, as means of payment or collateral, is limited by the threat of fraudulent practices. We assume that agents can produce fraudulent assets at a positive cost, which generates endogenous...
Persistent link: https://www.econbiz.de/10009325525
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Foreign Demand for Domestic Currency and the Optimal Rate of Inflation
Schmitt-Grohé, Stephanie Schmitt-Grohe; Uribe, Martín - National Bureau of Economic Research (NBER) - 2009
More than half of U.S. currency circulates abroad. As a result, much of the seignorage income of the United States is generated outside of its borders. In this paper we characterize the Ramsey-optimal rate of inflation in an economy with a foreign demand for its currency. In the absence of such...
Persistent link: https://www.econbiz.de/10008615792
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Chronic Specie Scarcity and Efficient Barter: The Problem of Maintaining an Outside Money Supply in British Colonial America
Grubb, Farley - National Bureau of Economic Research (NBER) - 2012
Colonial Americans complained that gold and silver coins (specie) were chronically scarce. These coins could be acquired only through importation. Given unrestricted trade in specie, market arbitrage should have eliminated chronic scarcity. A model of efficient barter and local inside money is...
Persistent link: https://www.econbiz.de/10011271405
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The Development of Opacity in U.S. Banking
Gorton, Gary - National Bureau of Economic Research (NBER) - 2013
An examination of U.S. banking history shows that economically efficient private bank money requires that information-revealing securities markets for bank liabilities be closed. That is, banks are optimally opaque, which is why they are regulated and examined. I show this by examining the...
Persistent link: https://www.econbiz.de/10010796573
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Macroeconomic Dynamics Near the ZLB: A Tale of Two Countries
Aruoba, S. Boragan; Schorfheide, Frank; Cuba-Borda, Pablo - National Bureau of Economic Research (NBER) - 2013
We propose and solve a small-scale New-Keynesian model with Markov sunspot shocks that move the economy between a targeted-inflation regime and a deflation regime and fit it to data from the U.S. and Japan. For the U.S. we find that adverse demand shocks have moved the economy to the zero lower...
Persistent link: https://www.econbiz.de/10010969307
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A Theory of Macroprudential Policies in the Presence of Nominal Rigidities
Farhi, Emmanuel; Werning, Iván - National Bureau of Economic Research (NBER) - 2013
We propose a theory of monetary policy and macroprudential interventions in financial markets. We focus on economies with nominal rigidities in goods and labor markets and subject to constraints on monetary policy, such as the zero lower bound or fixed exchange rates. We identify an aggregate...
Persistent link: https://www.econbiz.de/10010969453