Money creation in a random-matching model of money.

摘要

Essay 1. “Another Example in which Lump-Sum Money Creation is Beneficial.” (Joint with Neil Wallace.) We assume a two-unit upper bound on money holdings and adopt ex post individual rationality as the notion of implementability. The policy is a probabilistic version of the standard helicopter drops followed by proportional reduction in individual holdings. For all discount factors greater than a critical value, we show analytically that the ex ante optimum involves creation of money. This is done by finding the best outcome subject to no money creation and by showing that some creation can improve that outcome. Our results for a two-unit bound on holdings are indicative for what can happen with all higher bounds.; Essay 2. “Optimal Money Creation in a Random-Matching Model with Expost Individual Rationality.” Although Essay 1 accomplishes the goal of showing that money creation can be helpful, it does not describe the optima. I study the same model (while letting the bound on money holdings be arbitrary) where I do two things. First, I show that, under a mild restriction on the set of implementable outcomes, conditional on the amount of money transferred in a meeting there is no randomization over output, a property I call degeneracy. This degeneracy result facilitates the exploration of the trade-off between harmful and beneficial effects of money creation by way of examples. I compute optimal allocations for examples with a two-unit bound on holdings. These examples are consistent with conjecture that, in the region where money creation is beneficial, the optima do not have take-it-or-leave-it offers by consumers in all meetings—the bargaining rule imposed by Molico.; Essay 3. “Money Creation and Optimal Pairwise Core Allocations in a Matching Model.” Here I adopt the ex ante pairwise core notion of implementability. In contrast to what happens using the ex post IR notion, now the optimum, even with no money creation, involves binding participation constraints. Therefore, the proof technique of Essay 1 is not applicable. Moreover, it is difficult to get any analytical results. Therefore, I compute numerical examples. I find that in all examples there are no benefits of money creation. This is important because it leaves open whether money creation is beneficial if the bound on holdings is large. (Abstract shortened by UMI.)