Title

Inside Money and Liquidity

Author(s)

Nobuhiro Kiyotaki Nobuhiro Kiyotaki (Princeton University)

John Moore John Moore (University of Edinburgh)

Abstract

Inside money can be depend very broadly as any privately-issued long-term paper that is held by a number of agents in succession. Whenever paper circulates as a means of short-term saving (liquidity), it can properly be considered as money, or a medium of exchange, because agents hold it not for its maturity value but for its exchange value. In this article, we construct a model of an economy in which agents borrow by issuing long-term paper, and use the model to ask: When and why is circulation of the paper essential to the smooth running of the economy? If there is a shortage of liquidity, what are the symptoms? How does the economy respond?

Creation Date

2018-05

Section URL ID

Paper Number

2018-8

URL

http://www.princeton.edu/~kiyotaki/papers/km4-5.6.2018(1).pdf

File Function

Jel

E51

Keyword(s)

Inside money, Liquidity

Suppress

false

Series

13