Williamson, Stephen and Sanches, Daniel (2009): Money and Credit With Limited Commitment and Theft.
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We study the interplay among imperfect memory, limited commitment, and theft, in an environment that can support monetary exchange and credit. Imperfect memory makes money useful, but it also permits theft to go undetected, and therefore provides lucrative opportunities for thieves. Limited commitment constrains credit arrangements, and the constraints tend to tighten with imperfect memory, as this mitigates punishment for bad behavior in the credit market. Theft matters for optimal monetary policy, but at the optimum theft will not be observed in the model. The Friedman rule is in general not optimal with theft, and the optimal money growth rate tends to rise as the cost of theft falls.
|Item Type:||MPRA Paper|
|Original Title:||Money and Credit With Limited Commitment and Theft|
|Keywords:||Money; Credit; Limited Commitment; Monetary Policy|
|Subjects:||E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates
|Depositing User:||Stephen D Williamson|
|Date Deposited:||16. Feb 2010 00:26|
|Last Modified:||16. Feb 2013 06:37|
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