An idealized view of financial intermediation

Sissoko, Carolyn

Abstract

We consider an environment where the general equilibrium assumption that every agent buys and sells simultaneously is relaxed. We show that fiat money can implement a Pareto optimal allocation only if taxes are type-specific. We then consider intermediated money by assuming that financial intermediaries whose liabilities circulate as money have an important identifying characteristic: they are widely viewed as default-free. The paper demonstrates that default-free intermediaries who issue deposit accounts with credit lines to consumers can resolve the monetary problem and make it possible for the economy to reach a Pareto optimum.

Citation

Sissoko, C. (2007). An idealized view of financial intermediation. Economics, Article 2007-5

• Journal Article Type: Article
• Publication Date: Aug 15, 2007
• Deposit Date: Oct 17, 2019
• Publicly Available Date: Oct 18, 2019
• Journal: Economics: The Open-Access, Open-Assessment E-Journal
• Publisher: ZBW - Leibniz Information Centre for Economics
• Peer Reviewed: Peer Reviewed
• Article Number: 2007-5
• Keywords: Fiat money, financial intermediation, heterogeneous agents
• Public URL: https://uwe-repository.worktribe.com/output/3865472
• Publisher URL: http://www.economics-ejournal.org/ej-search?SearchableText=An+idealized+view+of+financial+intermediation