This article presents a microfounded model of money with a consumption and an investment market. We consider an economy in which only part of the investment returns can be pledged. A liquidity constraint arises when the pledgeable part of the returns are not enough to pay for investment costs. We show that when the liquidity constraint is binding, agents may make a cash downpayment and money can perform two roles—as a provider of liquidity services and exchange services. The liquidity constraint constitutes a channel though which underinvestment occurs even at low inflation rates.

Ferraris, L., & Watanabe, M. (2012). Liquidity constraints in a monetary economy. INTERNATIONAL ECONOMIC REVIEW, 53(1), 255-277 [10.1111/j.1468-2354.2011.00679.x].

Liquidity constraints in a monetary economy

FERRARIS, LEO
;
2012

Abstract

This article presents a microfounded model of money with a consumption and an investment market. We consider an economy in which only part of the investment returns can be pledged. A liquidity constraint arises when the pledgeable part of the returns are not enough to pay for investment costs. We show that when the liquidity constraint is binding, agents may make a cash downpayment and money can perform two roles—as a provider of liquidity services and exchange services. The liquidity constraint constitutes a channel though which underinvestment occurs even at low inflation rates.
Si
Articolo in rivista - Articolo scientifico
Scientifica
Money, Liquidity
English
255
277
23
Ferraris, L., & Watanabe, M. (2012). Liquidity constraints in a monetary economy. INTERNATIONAL ECONOMIC REVIEW, 53(1), 255-277 [10.1111/j.1468-2354.2011.00679.x].
Ferraris, L; Watanabe, M
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/311142
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