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Banks, Liquidity Management and Monetary Policy

Bianchi, Javier - 2014

We develop a tractable model of banks' liquidity management and the credit channel of monetary policy. Banks finance loans by issuing demand deposits. Loans are illiquid, and transfers of deposits across banks must be settled with reserves in a frictional over the counter market. To mitigate the...

Persistent link: https://www.econbiz.de/10013047393

The General Theory of Employment, Interest, and Money after 75 Years : The Importance of Being in the Right Place at the Right Time

Luzzetti, Matthew N. - 2011

This paper studies why the General Theory had so much impact on the economics profession through the 1960s, why that impact began to wane in the 1970s, and why many economic policymakers cling to many of the tenets of the General Theory. We discuss three key elements along these lines, including...

Persistent link: https://www.econbiz.de/10013131957

Money as a Unit of Account

Doepke, Matthias - 2013

We develop a theory that rationalizes the use of a dominant unit of account in an economy. Agents enter into non-contingent contracts with a variety of business partners. Trade unfolds sequentially in credit chains and is subject to random matching. By using a dominant unit of account, agents...

Persistent link: https://www.econbiz.de/10013074294

The Liquidity Premium of Near-Money Assets

Nagel, Stefan - 2014

Treasury bills and other near-money assets provide owners with liquidity service benefits that are reflected in prices … of money: The liquidity service benefits of near-money assets are more valuable when short-term interest rates are high … and hence the opportunity cost of holding money is high. Consistent with this prediction, the liquidity premium of T …

Persistent link: https://www.econbiz.de/10013051746

A Model of Fiat Money and Barter

Hayashi, Fumio; Matsui, Akihiko - 2000

We present an infinite horizon model with capital in which fiat money and barter are two competing means of payment …. Fiat money has value because barter is limited by the extent of a double coincidence of wants. The pattern of exchange … generally involves both money and barter. We find that the Chicago rule is sufficient for Pareto efficiency, while nominal …

Persistent link: https://www.econbiz.de/10014157957

Liquidity Mergers

Almeida, Heitor - 2011

We study the interplay between corporate liquidity and asset reallocation opportunities. Our model shows that financially distressed firms are acquired by liquid firms in their industries even when there are no operational synergies associated with the merger. We call these transactions...

Persistent link: https://www.econbiz.de/10013130982

Cash Holdings and Credit Risk

Acharya, Viral V. - 2011

Intuition suggests that firms with higher cash holdings are safer and should have lower credit spreads. Yet empirically, the correlation between cash and spreads is robustly positive and higher for lower credit ratings. This puzzling finding can be explained by the precautionary motive for...

Persistent link: https://www.econbiz.de/10013125920

Corporate Liquidity Management : A Conceptual Framework and Survey

Almeida, Heitor - 2013

Ensuring that a firm has sufficient liquidity to finance valuable projects that occur in the future is at the heart of the practice of financial management. Yet, while discussion of these issues goes back at least to Keynes (1936), a substantial literature on the ways in which firms manage...

Persistent link: https://www.econbiz.de/10013074911

Cash Burns : An Inventory Model with a Cash-Credit Choice

Alvarez, Fernando - 2015

We present a model that characterizes the relationship between optimal dynamic cash management and the choice of the means of payment. The novel feature of the model is the sequential nature of the payments choice: in each instant the agent can choose to pay with either cash or credit. This...

Persistent link: https://www.econbiz.de/10013024148

Liquidity Requirements, Liquidity Choice and Financial Stability

Diamond, Douglas W. - 2016

We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some depositors see sunspots that could lead them to run, and all depositors have incomplete information about the bank's ability to survive a run. The incomplete information means that the...

Persistent link: https://www.econbiz.de/10012997373