Credit and inflation under borrower's lack of commitment

• 成果类型: Article
• 署名作者: Diaz, Antonia; Perera-Tallo, Fernando
• 署名单位: Universidad Carlos III de Madrid; Universidad de la Laguna
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2011.03.015
• 发表日期: 2011
• 页码: 1888-1914
• 关键词: Monetary policy; Existence of credit; Friedman rule; self-enforcing debt; risk sharing

摘要

In this paper we study the effects of monetary policy on privately supplied credit in model economies where money is needed for transaction purposes and agents who default on their loans cannot participate in the credit market but are allowed to accumulate money. In our deterministic benchmark economy where agents alternate in productivity, credit has the role of smoothing consumption. We show that deflation crowds out credit completely. The reason is that deflation increases the value of being excluded from the credit market and eliminates the incentive to repay loans. When inflation is positive but low, credit, consumption smoothing and welfare increase with inflation, until inflation reaches a threshold at which the allocation is efficient and money becomes superneutral. (C) 2011 Elsevier Inc. All rights reserved.