Dietrich, D. orcid.org/0000-0002-0861-9380, Shin, J.K. orcid.org/0000-0002-8187-8813 and Tvede, M. orcid.org/0000-0003-0566-7026 (2020) Debt constraints and monetary policy. Journal of Mathematical Economics, 87. pp. 31-42. ISSN 0304-4068
Abstract
In the present paper we show how simple monetary policies can mitigate real effects of credit frictions. We consider stationary overlapping generations economies in which consumers are not equally efficient in producing capital and cannot commit to repay loans. The presence of money in itself does not mitigate the real effects of credit frictions. Equilibrium allocations are generally not Pareto optimal unless the returns on money and capital production are identical for more productive consumers. However, printing money and distributing it to young consumers increase their incomes allowing young more productive consumers to produce more capital. Consequently money printing increases output.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2020 Elsevier. This is an author produced version of a paper subsequently published in Journal of Mathematical Economics. Uploaded in accordance with the publisher's self-archiving policy. Article available under the terms of the CC-BY-NC-ND licence (https://creativecommons.org/licenses/by-nc-nd/4.0/). |
Keywords: | Financial frictions; Monetary policy; Overlapping generations economies |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 06 Jan 2023 15:01 |
Last Modified: | 07 Jan 2023 01:12 |
Published Version: | http://dx.doi.org/10.1016/j.jmateco.2019.12.004 |
Status: | Published |
Publisher: | Elsevier BV |
Refereed: | Yes |
Identification Number: | 10.1016/j.jmateco.2019.12.004 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:194801 |