Payments, credit and asset prices
Monika Piazzesi and
Martin Schneider
No 734, BIS Working Papers from Bank for International Settlements
Abstract:
This paper studies a modern monetary economy: trade in both goods and securities relies on money provided by intermediaries. While money is valued for its liquidity, its creation requires costly leverage. In ation, security prices and the transmission of monetary policy then depend on the institutional details of the payment system. The price of a security is higher if it helps back inside money, and lower if more inside money is used to trade it. In ation can be low in security market busts if bank portfolios suffer, but also in booms if trading absorbs more money. The government has multiple policy tools: in addition to the return on outside money, it affects the mix of securities used to back inside money.
Keywords: payments; monetary policy; liquidity trap; liquidity; asset prices; collateral premium; leverage; leverage costs; convenience yield; banking; scarce reserves; abundant reserves (search for similar items in EconPapers)
JEL-codes: E00 E13 E41 E42 E43 E44 E51 E52 E58 G1 G12 G21 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2018-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:734
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