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 ...

Woodford (1997, 1998) employs an inter-temporal general equilibrium model to examine the properties of the monetary system as it evolves form the use of a physical medium of exchange to an electronic medium. He presents a structure in which cash (money) as a means of payment can be made to vanish at the limit but where he claims the price level remains determinate. It is shown that Woodford's a...

A new theory of coexistence of money and higher-return assets is set out. It applies to any setting in which some trade involves an exchange of goods for assets and occurs between two people–a buyer and a seller. We show that there exists a function mapping the portfolios of the buyer and the seller to the trade that occurs such that (i) the trade is in the buyer-seller core and (ii) some peopl...

This paper seeks to explore non neutrality of money in the dispersion of transition process following an unanticipated money injection. It examines the responses of the output and nominal price to shocks. We show that a certain class of money injection schemes will induce quantitatively significant and persistent response in output, sluggish price adjustment, and a short-run negatively-sloped P...

When the zero lower bound on nominal interest rates binds, monetary policy cannot provide appropriate stimulus. We show that in the standard New Keynesian model, tax policy can deliver such stimulus at no cost and in a time-consistent manner. There is no need to use ine¢ cient policies such as wasteful public spending or future commitments to in‡ate. We conclude that in the New Keynesian model,...

With regard to their future health, adolescents are at a critical stage. Previous evaluations have shown that health screenings, counseling and other intervention programs during this phase of life important, in particular for those with low socio economic background. Unfortunately, tend little interest preventive programs. We designed field-experiment evaluate the effectiveness financial incen...

An inter-governmental body is encouraging the replacement of currency with the objective of discouraging illegal economic activities. This policy is analyzed in a searchtheoretic model where individuals choose legal or illegal production, settle trades via monetary or costly intermediated exchange, and where the government imperfectly monitors monetary transactions. Stationary monetary equilibr...

We study economies where some assets play an essential role to …nance consumption opportunities but payment arrangements are subject to a moral hazard problem. Agents can produce fraudulent assets at a positive cost, which generates an endogenous upper bound on the quantity of assets that can be exchanged for goods and services. This endogenous liquidity constraint depends on the characteristic...

Commodity money arises endogenously in a general equilibrium model with separate budget constraints for each transaction. Transaction costs imply differing bid and ask (selling and buying) prices. The most liquid good—with the smallest proportionate bid/ask spread—becomes commodity money. General equilibrium may not be Pareto efficient. If zero-transaction-cost money is available then the equil...

This paper uses a New Monetarist framework to study the trade of indivisible goods with divisible money in a frictional market. We first derive conditions under which stationary equilibrium exists, and then show that if equilibrium exits, it is unique. The uniqueness result is due to the commitment and coordination nature of the pricing mechanisms. Money is superneutral in the model with genera...