Arbeitspapier

Banking, Inside Money and Outside Money

This paper presents an integrated theory of money and banking. I address the following question: when both individuals and banks have private information, what is the optimal way to settle debts? I develop a dynamic model with micro-founded roles for banks and a medium of exchange. I establish two main results: first, markets can improve upon the optimal dynamic contract at the presence of private information. Market prices fully reveal the aggregate states and help solve the incentive problem of the bank. Secondly, it is optimal for the bank to require loans be settled with short-term inside money, i.e., bank money that expires immediately after the settlement of debts. Short-term inside money makes it less costly to induce truthful revelation and achieve more efficient risk sharing.

Sprache
Englisch

Erschienen in
Series: Queen's Economics Department Working Paper ; No. 1146

Klassifikation
Wirtschaft
Thema
banking
inside money
outside money
Geldtheorie
Bank
Kreditgeschäft
Information
Theorie

Ereignis
Geistige Schöpfung
(wer)
Sun, Hongfei
Ereignis
Veröffentlichung
(wer)
Queen's University, Department of Economics
(wo)
Kingston (Ontario)
(wann)
2007

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Sun, Hongfei
  • Queen's University, Department of Economics

Entstanden

  • 2007

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