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Collateral monetary equilibrium with liquidity constraints in an infinite horizon economy

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Abstract

This paper considers an infinite-horizon monetary economy with collateralized assets. A Central BanK lends money to households by creating short- and long-term loans. Households can deposit or borrow money on both short- and long-term maturity loans. If households want to sell a financial asset, they are required to hold certain commodities as collateral. They face a cash-in-advance constraints when buying commodities and financial assets. Under Uniform or Sequential Gains to Trade Hypothesis, the existence of collateral monetary equilibrium is ensured. I also provide some properties of equilibria, including the liquidity trap

Suggested Citation

  • Ngoc-Sang Pham, 2013. "Collateral monetary equilibrium with liquidity constraints in an infinite horizon economy," Documents de travail du Centre d'Economie de la Sorbonne 13055, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:13055
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    1. Robert Becker & Stefano Bosi & Cuong Van & Thomas Seegmuller, 2015. "On existence and bubbles of Ramsey equilibrium with borrowing constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 58(2), pages 329-353, February.
    2. Cuong Le Van & Ngoc-Sang Pham, 2016. "Intertemporal equilibrium with financial asset and physical capital," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 155-199, June.
    3. Robert Becker & Stefano Bosi & Cuong Le Van & Thomas Seegmuller, 2012. "On existence, efficiency and bubbles of Ramsey equilibrium with borrowing constraints," Caepr Working Papers 2012-001, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    4. Charles Goodhart & Pojanart Sunirand & Dimitrios Tsomocos, 2006. "A model to analyse financial fragility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(1), pages 107-142, January.
    5. repec:hal:pseose:hal-01302382 is not listed on IDEAS
    6. Aloisio Araujo & Mário Rui Páscoa & Juan Pablo Torres-Martínez, 2002. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Econometrica, Econometric Society, vol. 70(4), pages 1613-1638, July.
    7. Gaetano Bloise & Jacques H. Drèze & Herakles M. Polemarchakis, 2006. "Monetary Equilibria over an Infinite Horizon," Studies in Economic Theory, in: Christian Schultz & Karl Vind (ed.), Institutions, Equilibria and Efficiency, chapter 5, pages 69-93, Springer.
    8. Pradeep Dubey & John Geanakoplos, 2003. "Inside and outside fiat money, gains to trade, and IS-LM," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 347-397, March.
    9. Stefano Bosi & Cuong Le Van, 2011. "On the existence of a Ramsey equilibrium with endogenous labor supply and borrowing constraints," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00612131, HAL.
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    11. Felix Kubler & Karl Schmedders, 2003. "Stationary Equilibria in Asset-Pricing Models with Incomplete Markets and Collateral," Econometrica, Econometric Society, vol. 71(6), pages 1767-1793, November.
    12. Goodhart, C.A.E., 2006. "A framework for assessing financial stability?," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3415-3422, December.
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    Cited by:

    1. Cuong Le Van & Ngoc-Sang Pham, 2016. "Intertemporal equilibrium with financial asset and physical capital," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 155-199, June.

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    More about this item

    Keywords

    Monetary economy; liquidity constraint; collateralized asset; infinite horizon; liquidity trap;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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