Efficient monetary allocations and the illiquidity of bonds

• 成果类型: Article
• 署名作者: Boel, Paola; Camera, Gabriele
• 署名单位: Bowdoin College; Purdue University System; Purdue University
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2006.02.002
• 发表日期: 2006
• 页码: 1693-1715
• 关键词: money; Heterogeneity; Friedman rule; illiquidity

摘要

We construct a monetary economy with heterogeneity in discounting and consumption risk. Agents can insure against this risk with money and nominal government bonds, but all trades must be monetary. We demonstrate that a deflationary policy a la Friedman cannot sustain the constrained-efficient allocation as no-arbitrage imposes too stringent a bound on the return money can pay. The constrained-efficient allocation can be sustained when bonds have positive yields and, under certain conditions, only if they are illiquid. Illiquidity, meaning that bonds cannot be transformed into consumption as easily as cash, is necessary to eliminate arbitrage opportunities due to disparities in shadow interest rates. (c) 2006 Elsevier B.V. All rights reserved.