This paper uses a panel of state-level data to test whether changes in bank loan supply affect output. Since the U.S. states are small open economies with fixed exchange rates, state-specific shocks to money demand are automatically accommodated, leading to changes in lending if banks rely on deposits as a source of funding. Using these shocks as an instrumental variable, I find that shocks to ...

Abstract We provide the first systematic asset pricing analysis of one main safe categories, repurchase agreement (repo). Based on temporal and cross-sectional variation in short-term rates, we form a carry that, together with market factor, prices these near-money assets linear model. The depicts heterogeneity nonpecuniary convenience yields collateral increases safety premium liquidity reflec...

Using non-parametric weak separability tests that are extended to allow for measurement errors in the data, a broad group of UK monetary assets is found to be weakly separable from consumer goods and leisure over the larger part of the nineties. Financial innovations have made assets with substantial interest rate risk (e.g. unit trusts) more liquid and recent developments in monetary aggregati...

Consumers make transactions of different sizes over time. This paper shows that this fact, together with transaction costs of various assets, can help in developing a theory of liquidity. Assets with different cost structures are used to purchase different sizes of transactions. This can explain the demand for money itself, the precautionary demand for money, and the demand for cash and demand ...

This paper examines some of the characteristics of the foreign exchange market in the 1920s floating period. Nominal returns appear to exhibit properties consistent with asset prices on modern more well-organized financial markets; i.e. they appear to be well described by martingales and possess persistent time dependent heteroscedasticity. In order to deal with the extreme kurtosis in the exch...

Central bank behavior is often summarized by simple rules for operating targets, i.e., for a short-run nominal interest rate or for a money growth rate. In this paper we examine conditions under which these rules lead to identical fundamental solutions of a conventional business cycle model. When prices are ‡exible, forward looking interest rate rules can be equivalent to money growth policy. I...

This paper develops a Ricardian model with money to study North-South trade that is mediated by the currency of the North. The model shows that an increase in the supply of Northern money results in inflation being “exported” to the South. The increase in the supply of Northern money also has real effects: (1) it transfers real resources from the South to the North, lowers the wage rate in the ...

In the U.S., the share of payments made “electronically” – with credit cards, debit cards and direct payments – grew from 25 percent in 1995 to over 50 percent in 2002 (BIS, 2004). This paper frames this aggregate change in the context of individual behavior. Family level data indicate that the share of families using or holding these instruments also increased over the same period. The persona...

In this paper we estimate a time-series model of the financial asset portfolio shares in Egypt, distinguishing between assets of varying degrees of liquidity and between domestic currency and foreign currency deposits. While financial liberalization and financial stability are found to have encouraged domestic residents to increase the share of their portfolio composed of domestic currency asse...