This paper presents a three-period model to analyze why central-bank notes, i.e., payment instruments, and bank deposits, i.e., saving instruments, must be separated from each other as is the case in the modern banking system. The model shows that credit creation by note-issuing commercial banks...

This paper compares fiat money and a Lucas' tree in an overlapping generations model. A Lucas' tree with a positive dividend has a unique competitive equilibrium price. Moreover, the price converges to the monetary equilibrium value of fiat money as the dividend goes to zero in the limit. Thus,...

This paper presents an overlapping generations model in which old generations require specific services from young generations due to idiosyncratic shocks. An example of such services is elderly care. The model shows that a two-money system in which fiat money for such services is separated from...

The efficiency of the current payment system rests not only on engineering technology but also on the legal tender and central bank system enacted by each country’s law. This essay compares the current payment system with an alternative payment system that uses electronic records, such as...

This paper simulates the cash flows and balance sheets of the Bank of Japan (BoJ) before and after exiting from Quantitative and Qualitative Monetary Easing (QQE) under various scenarios. The simulations show that the BoJ will record significant accounting losses after exiting QQE. These losses...

This paper considers the optimal degree of discretion in monetary policy when the central bank conducts policy based on its private information about the state of the economy and is unable to commit. Society seeks to maximize social welfare by imposing restrictions on the central bank's actions...

When individuals' labor and capital income are subject to uninsurable idiosyncratic risks, should capital and labor be taxed, and if so how? In a two period general equilibrium model with production, we derive a decomposition formula of the welfare effects of these taxes into insurance and...

We propose a new method to estimate quality adjusted commercial property price indexes using real estate investment trust (REIT) data. Our method is based on the present value approach, but the way the denominator (i.e., the discount rate) and the numerator (i.e., cash flows from properties) are...

Benhabib, Schmitt-Grohe, and Uribe (2001) argue for the existence of a deflation steady state when the zero lower bound on the nominal interest rate is considered in a Taylor-type monetary policy rule. This paper estimates a medium-scale DSGE model with a deflation steady state for the Japanese...