In monetary models where agents are subject to trading shocks there is typically an ex post inefficiency since some agents are holding idle balances while others are cash constrained. This problem creates a role for financial intermediaries, such as banks, who accept nominal deposits and make nominal loans. In general, financial intermediation improves the allocation. The gains in welfare come from the payment of interest on deposits and not from relaxing borrowers' liquidity constraints. We also demonstrate that when credit rationing occurs increasing the rate of inflation can be welfare improving.

Money, credit and banking / Berentsen, Aleksander; Camera, Gabriele; Waller, Christopher*. - In: JOURNAL OF ECONOMIC THEORY. - ISSN 0022-0531. - STAMPA. - 135:1(2007), pp. 171-195. [10.1016/j.jet.2006.03.016]

Money, credit and banking

Camera, Gabriele;
2007

Abstract

In monetary models where agents are subject to trading shocks there is typically an ex post inefficiency since some agents are holding idle balances while others are cash constrained. This problem creates a role for financial intermediaries, such as banks, who accept nominal deposits and make nominal loans. In general, financial intermediation improves the allocation. The gains in welfare come from the payment of interest on deposits and not from relaxing borrowers' liquidity constraints. We also demonstrate that when credit rationing occurs increasing the rate of inflation can be welfare improving.
2007
Money, credit and banking / Berentsen, Aleksander; Camera, Gabriele; Waller, Christopher*. - In: JOURNAL OF ECONOMIC THEORY. - ISSN 0022-0531. - STAMPA. - 135:1(2007), pp. 171-195. [10.1016/j.jet.2006.03.016]
Berentsen, Aleksander; Camera, Gabriele; Waller, Christopher*
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/635716
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