Money and Default

C. A. E. Goodhart

Chapter Chapter 13 in Keynes for the Twenty-First Century, 2008, pp 213-223 from Palgrave Macmillan

Abstract: Abstract If everyone always paid their debts in full and at the due date, there would be little or no need for commercial banks. Everyone would then have the highest possible credit rating, would need no monitoring, and could borrow, or lend, at the default-free rate of interest. Although many formal macroeconomic models (implicitly) employ an assumption of a default-free system in their so-called transversality assumption, it is not, alas, a characteristic of the real world.

Keywords: Monetary Policy; Commercial Bank; Default Risk; Interbank Market; Fiat Money (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1057/9780230611139_14

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