Inside Money and Liquidity

Nobuhiro Kiyotaki and John Moore
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Nobuhiro Kiyotaki: Princeton University
John Moore: University of Edinburgh

Working Papers from Princeton University. Economics Department.

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?

Keywords: Inside money; Liquidity (search for similar items in EconPapers)
JEL-codes: E51 (search for similar items in EconPapers)
Date: 2018-05
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2018-8

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