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Search-theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential. However, trac-table versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis. We propose a new framework, based on explicit micro foundations, within which macro policy can be(More)
We construct a model where capital competes with fiat money as a medium of exchange, and establish conditions on fundamentals under which fiat money can be both valued and socially beneficial. When the socially efficient stock of capital is too low to provide the liquidity agents need, they overaccumulate productive assets to use as media of exchange. When(More)
A salient feature of the recent recession is that regions that have experienced the largest changes in household leverage have also experienced the largest declines in output and employment. We study a cash-in-advance economy in which home equity borrowing, alongside public money, is used to conduct transactions. Declines in home prices tighten the(More)
This paper pursues a line of Cass and Shell, who advocate monetary models that are \genuinely dynamic and fundamentally disaggrega-tive" and incorporate \diversity among households and variety among commodities." Recent search-theoretic models ¯t this description. We show that, like overlapping generations models, search models generate interesting dynamic(More)
We study the efficiency of dealers' liquidity provision and the desirability of policy intervention in over-the-counter (OTC) markets during crises. Our theory emphasizes two key frictions in OTC markets: finding counterparties takes time, and trade is bilateral, with quantities and prices determined by bargaining. We model a crisis as a negative shock to(More)
Two forces have reshaped global securities markets in the last decade: Exchanges operate at much faster speeds and the trading landscape has become more fragmented. In order to analyze the positive and normative implications of these evolutions, we study a framework that captures (i) exchanges' incentives to invest in faster trading technologies and (ii)(More)
We develop a model of monetary exchange in over-the-counter markets to study the effects of monetary policy on asset prices and standard measures of financial liquidity, such as bid-ask spreads, trade volume, and the incentives of dealers to supply immediacy, both by participating in the market-making activity and by holding asset inventories on their own(More)
I characterize a large family of monetary policies that implement Milton Friedman's prescription of zero nominal interest rates in a monetary search economy with multiple assets and aggregate uncertainty. This family of optimal policies is defined by two properties: (i) the money supply must be arbitrarily close to zero for an infinite number of dates, and(More)
We study the e¢ ciency implications of bargaining in frictional capital markets in which …rms match bilaterally with dealers in order to buy or sell capital. We show how two of the distinguishing characteristics of capital – ownership and the intertemporal nature of investment –give rise to a dynamic ine¢ ciency. Firms that anticipate buying capital in the(More)
  • Jeremy Lise, Vincent Sterk, Wei, Philip Kircher, Leo Kaas, Edouard Schaal +5 others
  • 2016
This paper investigates the importance of credit market frictions on labour market outcomes. I build a tractable search and matching model of the labour market with firm dynamics and hetero-geneity in productivity and size. Firms produce output using labour, which they hire in a frictional market modelled by a directed search approach, and capital which(More)