Economics at your fingertips  

Liquidity Regulation in a Monetary Economy

Juan Aquino ()

No 2020-013, Working Papers from Banco Central de Reserva del Perú

Abstract: A market failure that justifies liquidity regulation lies on the incompleteness of financial markets when there is risk about the aggregate distribution of transaction types. I develop a framework in which outside (fiat, government-provided) and inside (plastic, bank-created) money co-exist as means of payment under either complete or incomplete financial markets for aggregate risk. The welfare analysis is reduced to comparing only two parameters: the currency-to-liability ratio δ which is set by the government and the fraction ρ of banks’ depositors engaged in cash-only transactions (inside money cannot be accepted). In equilibrium, when δ

Keywords: Capital banks; financial markets; endogenous liquidity; regulation; monetary policy. (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 (search for similar items in EconPapers)
Date: 2020-12
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... trabajo-013-2020.pdf Application/pdf
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working Papers from Banco Central de Reserva del Perú Contact information at EDIRC.
Bibliographic data for series maintained by Research Unit ().

Page updated 2022-07-02
Handle: RePEc:rbp:wpaper:2020-013