Outside versus inside bonds: A Modigliani-Miller type result for liquidity constrained economies

• 成果类型: Article
• 署名作者: Berentsen, Aleksander; Waller, Christopher
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - St. Louis; University of Basel; University of Notre Dame
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2011.06.016
• 发表日期: 2011
• 页码: 1852-1887
• 关键词: liquidity; financial markets; monetary policy; search

摘要

When agents are liquidity constrained, two options exist sell assets or borrow. We compare the allocations arising in two economies: in one, agents can sell government (outside) bonds and in the other they can borrow by issuing (inside) bonds. All transactions are voluntary, implying no taxation or forced redemption of private debt. We show that any allocation in the economy with inside bonds can be replicated in the economy with outside bonds but that the converse is not true. However, the optimal policy in each economy makes the allocations equivalent. (C) 2011 Elsevier Inc. All rights reserved.