Collateral monetary equilibrium with liquidity constraints in an infinite horizon economy

Ngoc-Sang Pham
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Ngoc-Sang Pham: University Paris I Pantheon-Sorbonne

No 178, Working Papers from Development and Policies Research Center (DEPOCEN), Vietnam

Abstract: This paper considers an infinite-horizon monetary economy with collateralized assets in which only commodities can be used as collateral. A Central Bank lends money to households by creating short- and long-term loans. Households can deposit or borrow money on both short- and long-term maturity; they face a cash-in-advance constraint when buying commodities of financial assets. Under various Gains to Trade Hypotheses, the existence of collateral monetary equilibrium is ensured. I also provide some properties of equilibira, including the liquidity trap.

Keywords: Monetary economy; liquidity constraint; collateralized asset; infinite horizon; liquidity trap (search for similar items in EconPapers)
Pages: 18 pages
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:dpc:wpaper:1014

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