American Economic Review Vol. 86 No. 5 1996
The Payments System, Liquidity, and Rediscounting
Abstract
In an economy where fiat money serves both as a medium of exchange and the means by which debts are cleared, it is shown that nonoptimal equilibria of constrained liquidity may arise. Optimality may be restored by temporary expansions of the monetary base (e.g., an active central-bank "discount window").
- Volume
- 86
- Issue
- 5
- Pages
- 1126-1138
- Sources
- bibtex:phds-export.bib