money and capital abstract the effects of money anticipated inflation on capital formation is a classic issue in macroeconomics previous papers adopt reduced form approaches putting money in the utility function or imposing cash in advance but using otherwise frictionless models we follow instead a literature that tries to be explicit about the frictions making money essential this introduces new elements including a two sector structure with centralized and decentralized markets stochastic trading opportunities and bargaining these elements matter quantitatively and numerical results differ from findings in the reduced form literature the analysis also reduces a gap between microfounded monetary economics and mainstream macro

revealed objective functions of microfinance institutions evidence from bangladesh abstract this paper discerns between two alternative objective functions for not for profit microfinance institutions mfis profit maximization and poverty targeting i use the strategic branch location choices of the two largest mfis in a mature concentrated market to reveal their objectives i consider location decisions to be the pure strategy nash equilibrium outcome of a one shot game where the mfis simultaneously choose markets in which to locate as well as how many branches to open in each applying the duality principle i nest fully a pure profit maximization objective within a poverty targeting motive i test the model using comprehensive data from bangladesh in 2003 structurally estimating profit and impact functions my msm estimates suggest that pure profit maximization cannot explain the branch placement pattern for grameen bank or brac they both deviate towards poverty alleviation targeting one higher standard deviation of poverty headcount costs grameen 35 2 of its potential profits and brac 51 4

the microfinance promise in the past decade microfinance programs have demonstrated that it is possible to lend to low income households while maintaining high repayment rates even without requiring collateral the programs promise a revolution in approaches to alleviating poverty and spreading financial services and millions of poor households are served globally a growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success particularly the use of group lending contracts with joint liability for the most part however high repayment rates have not translated into profits and studies of impacts on poverty yield a mixed picture in describing emerging tensions the paper highlights the diversity of innovative mechanisms beyond group lending contracts the measurement of financial sustainability the estimation of economic and social impacts the costs and benefits of subsidization and the potential to reduce poverty through savings programs rather than just credit the promise of microfinance has pushed far ahead of the evidence and an agenda is put forward for addressing critical empirical gaps and sharpening the terms of policy discussion

single period multiproduct inventory models with substitution we study a single period multiproduct inventory problem with substitution and proportional costs and revenues we consider n products and n demand classes with full downward substitution i e excess demand for class i can be satisfied using product j for i j we first discuss a two stage profit maximization formulation for the multiproduct substitution problem we show that a greedy allocation policy is optimal we use this to write the expected profits and its first partials explicitly this in turn enables us to prove additional properties of the profit function and several interesting properties of the optimal solution in a limited computational study using two products we illustrate the benefits of solving for the optimal quantities when substitution is considered at the ordering stage over similar computations without considering substitution while ordering specifically we show that the benefits are higher with high demand variability low substitution cost low profit margins or low price to cost ratio high salvage values and similarity of products in terms of prices and costs

tips from tips the informational content of treasury inflation protected security prices treasury inflation protected securities tips are frequently thought of as risk free real bonds using no arbitrage term structure models we show that tips yields exceeded risk free real yields by as much as 100 basis points when tips were first issued and up to 300 basis points during the 2007 2008 financial crisis this spread predominantly reflects the poorer liquidity of tips relative to nominal treasury securities other factors including the indexation lag and the embedded deflation protection in tips play a much smaller role ignoring this spread also significantly distorts the informational content of tips break even inflation a widely used proxy for expected inflation

a two item newsboy problem with substitutability previous research on the newsboy problem is based on the assumption that in case of a shortage unsatisfied demand is lost such an assumption is inappropriate for items that have a close substitute in this paper we formulate a two item newsboy problem with substitutability tinps upper and lower bounds on the optimal order quantities of the two items are derived since analytical solutions to the problem are difficult to obtain a monte carlo simulation is used to identify the optimal solution to the tinps order quantities identified by the simulation provide higher expected profit than would have been obtainable without considering substitutability

general equilibrium with nonconvexities and money in a general equilibrium economy with nonconvexities there are sunspot equilibria with good welfare properties sunspots can ameliorate the effects of the nonconvexities for these economies we show that agents act as if they have quasi linear utility functions we use this result to construct a new model of monetary exchange along the lines of lagos and wright where trade occurs in both centralized and decentralized markets but instead of quasi linear preferences we assume general preferences but with indivisible labor this suggests that modern monetary theory is more robust than one might have thought it also constitutes progress on the classic problem of integrating monetary economics and general equilibrium theory

the effects of selling packaged goods on inventory decisions in this paper we study within a newsboy type modeling framework the common business practice of retail firms to sell products not only as independent items but also as part of multiproduct packets packaged goods our emphasis is on understanding the effects of such practices on the inventory decisions of the firm we provide insights on the resulting level of suboptimality when inventory decisions are made with demand information only on the independent items and without accounting for the demand substitution structure induced between independent items and packaged goods our stylized model studies an environment with two products that are not direct substitutes for each other sold either independently or as part of a packet that contains one unit of each we provide necessary and sufficient optimality conditions for this model and suggest an efficient numerical search for obtaining the optimal stocking levels an extensive computational study allowed us to provide insights on the nature of the optimal stocking policies the suboptimality of independent newsboy policies the effects of demand correlation among individual products and multiproduct packets and the determining role of induced substitution structure among products during stockout occasions on the profitability of the inventory system

on the future of macroeconomics a new monetarist perspective this article argues that a pressing goal for macroeconomics is to incorporate financial considerations but we need models with solid microfoundations in particular the use of assets in facilitating exchange as well as different credit or other financial arrangements should be outcomes of not inputs to theories as a preview i suggest that mainstream macro does a good job explaining many phenomena and a financial crisis does not disprove such theory but understanding crises requires better incorporating factors related to money credit banking and liquidity the approach called new monetarist economics can help a lot in this regard

the competitive newsboy we consider a competitive version of the classical newsboy problem in which a firm must choose an inventory or production level for a perishable good with random demand and the optimal solution is a fractile of the demand distribution and investigate the impact of competition upon industry inventory a splitting rule specifies how initial industry demand is allocated among competing firms and how any excess demand is allocated among firms with remaining inventory we examine the relation between equilibrium inventory levels and the splitting rule and provide conditions under which there is a unique equilibrium our most general result is that if all excess demand is reallocated i e there is perfect substitutability then competition never leads to a decrease in industry inventory

currencies and the allocation of risk the welfare effects of a monetary union in a general equilibrium model with incomplete asset markets nominal securities and mean variance preferences a monetary union is desirable when the gain from eliminating excess volatility of nominal variables exceeds the cost of reducing the number of currencies with which to hedge risks copyright 1998 by american economic association

the sacrifices of micro borrowers in ghana a customer protection perspective on measuring over indebtedness this article measures the over indebtedness of micro borrowers it defines over indebtedness from a customer protection perspective based on the borrowers sacrifices we analyse the sacrifices borrowers experience and find that 30 per cent of borrowers are over indebted we then test risk management indicators of debt problems as predictors of over indebtedness over indebtedness is strongly related to delinquency and the debt to income ratio but not to debt amounts or to multiple borrowing although our model correctly predicts 72 6 per cent of cases even the best indicators identify only a few over indebted borrowers risk management is not enough to protect customers against over indebtedness but the industry needs to measure customer experiences directly

loan officers gender and microfinance repayment rates this study examines the impact of loan officer characteristics on repayment rates of microfinance borrowers in mexico applying multilevel analyses with special attention to the impact of the gender of the loan officer on default rates the results strongly suggest that loan officers play a crucial role in improving repayment rates in microfinance and that male loan officers are better able to induce borrowers to repay than female loan officers this may be because men exert authority over women and face fewer problems working late travelling through unsafe places and combining a position as counsellor with enforcing repayment

a social and environmental approach to microfinance credit scoring microfinance institutions provide loans to low income individuals their credit scoring systems if they exist are strictly financial although many institutions consider the social and environmental impact of their loans they do not incorporate formal systems to estimate these social and environmental impacts this paper proposes that their creditworthiness evaluations should be coherent with their social mission and accordingly should estimate the social and environmental impact of microcredit thus a decision support system to facilitate microcredit granting is proposed using a multicriteria evaluation the assessment of social impact is performed by calculating the social net present value the system captures credit officers experience and addresses incomplete and intangible information the model has been tested in a microfinance institution the paper shows how a small institution can include social and environmental issues in its decision making systems to evaluate credit applications a gap in the preferences was found between members of the board who are socially driven and managers and credit officers who are financially drifted this mission drift was corrected the approach followed contributed to creating a culture of social and environmental assessment within the institution especially among credit officers thereby translating microfinance institutions social mission into numbers

a static approximation for dynamic demand substitution with applications in a competitive market we propose a static approximation of dynamic demand substitution behavior based on a fluid network model and a service inventory mapping this approximation greatly enhances our ability to analyze the interdependent inventory service price and product assortment decisions in noncompetitive and competitive scenarios with demand substitution we demonstrate that the approximation is well behaved and then apply it to two previously intractable applications first we study a price and service competition between single product retailers after establishing a unique pure strategy nash equilibrium we find that competition results in lower price higher demand and a higher level of inventory we also observe that the aggregate profit and inventory level increase to positive constants as the number of retailers goes to infinity second we study a duopolistic competition on price service and product assortment we establish a pure strategy nash equilibrium for the product assortment competition and identify a condition for uniqueness we find that competition on both price and product assortment results in lower price and less variety for each competitor but the total number of products and the aggregate inventory level in a duopoly market are both likely to be higher than in a monopolistic market

banking competition good or bad the case of promoting micro and small enterprise finance in kazakhstan competition is claimed to be beneficial in development projects promoting micro and small enterprise finance although there are still doubts as to whether these loans can be developed into a pro

deterministic eoq with partial backordering and correlated demand caused by cross selling abstract there has been much work regarding the deterministic eoq with partial backordering the majority of these studies assume no correlation in sales so independent demands across items is applied in the models however it is generally recognized that cross selling effects between items often appear in real contexts thus incorporating such effects in the inventory model in the form of correlated demands makes it of more practical relevance in this paper the authors address a two item inventory system where the demand of a minor item is correlated to that of a major item because of cross selling we firstly present a two item eoq model with identical order cycles where the unmet demand of the major item can be partially backordered with lost sales whereas the demand of the minor item must be met without stockouts this model is further extended to fit a more practical case where the order cycle of the major item is an integer multiple of that of the minor item the optimal solutions of the two models as well as the inventory decision procedures are also developed comparative analysis on these two eoq models has been drawn in the computational study which presents some insights into the parameter effect on the optimal inventory policy

inflation indexed bonds and nominal bonds financial innovation and precautionary motives this paper introduces a two period monetary general equilibrium model with proportional transaction costs on nominal and inflation indexed bonds this paper demonstrates that financial innovation on indexed bonds causes equilibrium interest rates of the nominal bond to increase when agents have precautionary saving motives this result implies that ignoring precautionary motives would underestimate savers welfare gain and overestimate borrowers welfare gain from innovation on indexed bonds

inflation expectations real rates and risk premia evidence from inflation swaps this paper develops a model of the term structures of nominal and real interest rates driven by state variables representing the short term real interest rate expected inflation inflation s central tendency and four volatility factors that follow garch processes we derive analytical solutions for nominal bond yields yields on inflation indexed bonds that have an indexation lag and the term structure of expected inflation unlike prior studies the model s parameters are estimated using data on inflation swap rates as well as nominal yields and survey forecasts of inflation the volatility state variables fully determine bonds time varying risk premia and allow for stochastic volatility and correlation between bond yields yet they have small effects on the cross section of nominal yields allowing for time varying volatility is particularly important for real interest rate and expected inflation processes but long horizon real and inflation risk premia are relatively stable

learning matching and growth we examine an endogenous growth model in which market frictions are an integral part of the economic environment workers invest in education when young which raises their productivity onice employed the level of schooling also acts as a key determinant of the rate of economic growth by influencing workers ability to accumulate additional human capital on the job once schooling is completed workers search for employment the division of the surplus between vacancies and searching workers is characterized as is the optimal level of education the economy may display multiple steady state growth paths

micro finance competition motivated micro lenders double dipping and default abstract we develop a tractable model of competition among socially motivated mfis so that the objective functions of the mfis put some weight on their own clients utility we find that the equilibrium involves double dipping i e borrowers taking multiple loans from different mfis whenever the mfis are relatively profit oriented further double dipping necessarily leads to default and inefficiency and moreover borrowers who face relatively higher transactions costs optimally decide to double dip interestingly an increase in mfi competition can increase the extent of double dipping and default further the interest rates may go either way with the interest rate likely to increase with more competition if the mfis are very socially motivated

welfare effects of financial innovation in incomplete markets economies with several consumption goods abstract we show that in almost every incomplete markets economy with more than one consumption good and with sufficiently many uninsured states of nature at any general equilibrium of this economy it is possible to arbitrarily perturb the equilibrium utilities merely by introducing the appropriate asset making for example all agents worse off this result demonstrates that the examples given by hart on the optimality of equilibrium when the market structure is incomplete j econ theory11 1975 418 443 and others are actually general phenomena and is in sharp contrast to the intuition that innovation since it expands financial opportunities should benefit all agents journal of economic literature classification numbers d52 d60 g10

microfinance in times of crisis the effects of competition rising indebtedness and economic crisis on repayment behavior this paper analyzes repayment determinants for loans from caja los andes a bolivian mi crolender the analysis focuses on the influence of recent changes in the bolivian microfinance market in particular we examine the effects of the rapidly growing supply of funds for micro loans the increasing competition a rising level of indebtedness among micro entrepreneurs and the recent economic crisis our results show a two fold influence structure of competition and indebtedness firstly clients with loans from multiple sources at the same time are found to be more likely to default than others secondly clients with given characteristics have an overall better repayment behaviour in areas with higher competition and a higher supply of micro loans

stocking retail assortments under dynamic consumer substitution we analyze a single period stochastic inventory model newsboy like model in which a sequence of heterogeneous customers dynamically substitute among product variants within a retail assortment when inventory is depleted the customer choice decisions are based on a natural and classical utility maximization criterion faced with such substitution behavior the retailer must choose initial inventory levels for the assortment to maximize expected profits using a sample path analysis we analyze structural properties of the expected profit function we show that under very general assumptions on the demand process total sales of each product are concave in their own inventory levels and possess the so calleddecreasing differences property meaning that the marginal value of an additional unit of the given product is decreasing in the inventory levels of all other products for a continuous relaxation of the problem we then show via counterexamples that the expected profit function is in general not even quasiconcave thus global optimization may be difficult however we propose and analyze a stochastic gradient algorithm for the problem and prove that it converges to a stationary point of the expected profit function under mild conditions finally we apply the algorithm to a set of numerical examples and compare the resulting inventory decisions to those of some simpler naive heuristics the examples show that substitution effects can have a significant impact on an assortment s gross profits the examples also illustrate some systematic distortions in inventory decisions if substitution effects are ignored in particular under substitution one should stock relatively more of popular variants and relatively less of unpopular variants than a traditional newsboy analysis indicates

bidding for money we analyze monetary exchange in a model that allows for directed search and multilateral matches we consider environments with divisible goods and indivisible money and compare the results with those in models that use random matching and bilateral bargaining two different pricing mechanisms are used ex ante price posting and ex post bidding auctions also we consider settings both with and without lotteries we find that the model generates very simple and intuitive equilibrium allocations that are similar to those with random matching and bargaining but with different comparative static and welfare properties

the multi item newsvendor model with cross selling and the solution when demand is jointly normally distributed abstract products are often demanded in tandem because of the cross selling effect the demand for an item can increase if sales of its cross selling associated items are achieved or decrease when the associated items are out of stock resulting in lost sales therefore a joint inventory policy should be pursued in a cross selling system this paper introduces customer driven cross selling into centralized and competitive newsvendor nv models by representing an item s effective demand as a function of other items order quantities we derive first order optimality conditions for the centralized model in addition to pure strategy nash equilibrium conditions and uniqueness conditions of the equilibria for the competitive model we further develop gradient based gb and iteration based ib algorithms to solve the centralized and competitive models respectively a computational study verifies the effectiveness of the proposed algorithms the computational results show that a larger cross selling effect leads to a larger order quantity in a centralized nv model but a smaller order quantity in a competitive nv model and a larger positive correlation between items demands leads to higher profits with smaller order quantities in both models moreover nvs will order more items if the demand variance is greater however resulting in lower profits in a competitive situation one will prefer smaller order quantities than in a centralized decision situation

trading uncertainty and market form this paper examines purely random multilateral matching among a large number of informationally isolated individuals who desire to trade the structure of links among traders is characterized by means of random graphs defined by a parameter that is chosen by prospective traders trading groups of all sizes including pairs as a special case result but the size distribution may contain a mass point at infinity that is within a certain subset of the entire economy trading uncertainty is entirely eliminated the equilibrium price distribution consists of a mass point and of a mixture of densities copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

microfinance and dynamic incentives dynamic incentives where incentives to repay are generated by granting access to future loans is one of the methodologies used by microfinance institutions mfis in this paper i present a model of dynamic incentives where lenders are uncertain over how much borrowers value future loans loan terms are determined endogenously and loans become more favorable as the probability of default becomes lower i show that in all equilibria but one all borrowers default including the most patient ones i then compare equilibria with and without double dipping i show that when credit constrained borrowers have access to multiple loans equilibrium loan terms have to become more favorable to overcome increased gains from default if borrower s access to multiple loans is unforseen by lenders then the default rates go up in the short run finally if lenders use group loans it generates endogenous hyperbolic discounting even though the borrowers are exponential discounters

are microfinance markets monopolistic do microfinance institutions mfis operate in a monopoly monopolistic competition environment or are their revenues derived under perfect competition markets we employ the panzar rosse revenue t

newsvendor problem with clearance pricing abstract the newsvendor nv problem assumes that the salvage clearance price at which the leftover inventory is disposed of is a given parameter of the problem in this paper we relax this assumption and consider the nv problem with the salvage clearance price as a decision variable we have drawn from the literatures on the nv problem and clearance markdown dynamic pricing to develop three stochastic models in this paper in the first model we assume that while the seasonal demand is exogenous and stochastic the end of season demand is endogenous and deterministic the second model extends the first model by assuming that the end of season demand is endogenous and stochastic finally the third model considers that both the seasonal and end of season demands are endogenous and stochastic we have provided solution procedures for solving the stochastic optimization problems we have also performed sensitivity analyses to assess the sensitivity of the optimal expected profit and order quantity to different problem parameters specifically we have found that the optimal expected profit is most sensitive to the variable cost per unit mean seasonal demand and market potential of end of season demand our models will be useful for retailers of products with a short selling season and a short end of season period for clearance sale of leftover inventory such that there is a single replenishment opportunity at the beginning of the season and a single opportunity for setting the salvage price for clearance sale based on the leftover inventory and end of season demand pattern the paper is concluded with possible directions for future research

incorporating one way substitution policy into the newsboy problem with imprecise customer demand this paper presents an approach for solving an inventory model for single period products with maximizing its expected profit in a fuzzy environment in which the retailer has the opportunity for substitution though various structures of substitution arise in real life in this study we consider the fuzzy model for two item with one way substitution policy this one way substitutability is reasonable when the products can be stored according to certain attribute levels such as quality brand or package size again to describe uncertainty usually probability density functions are being used however there are many situations in real world that utilize knowledge based information to describe the uncertainty the objective of this study is to provide an analysis of single period inventory model in a fuzzy environment that enables us to compute the expected resultant profit under substitution an efficient numerical search procedure is provided to identify the optimal order quantities in which the utilization of imprecise demand and the use of one way substitution policy increase the average expected profit the benefit of product substitution is illustrated through numerical example

revenue management through dynamic cross selling in e commerce retailing we consider the problem of dynamically cross selling products e g books or services e g travel reservations in the e commerce setting in particular we look at a company that faces a stream of stochastic customer arrivals and may offer each customer a choice between the requested product and a package containing the requested product as well as another product what we call a packaging complement given consumer preferences and product inventories we analyze two issues 1 how to select packaging complements and 2 how to price product packages to maximize profits we formulate the cross selling problem as a stochastic dynamic program blended with combinatorial optimization we demonstrate the state dependent and dynamic nature of the optimal package selection problem and derive the structural properties of the dynamic pricing problem in particular we focus on two practical business settings with the emergency replenishment model and without the lost sales model the possibility of inventory replenishment in the case of a product stockout for the emergency replenishment model we establish that the problem is separable in the initial inventory of all products and hence the dimensionality of the dynamic program can be significantly reduced for both models we suggest several packaging pricing heuristics and test their effectiveness numerically

an extension of partial backordering eoq with correlated demand caused by cross selling considering multiple minor items abstract zhang et al 2011 proposed the partial backordering eoq with correlated demand caused by cross selling where a portion of the sales of a minor item is associated with those of a major item in this paper we extend their model to make it more applicable to dealing with the inventory replenishment problem for multiple associated items we formulate the model as a mixed integer nonlinear programming minlp problem and develop a global optimum search procedure with the fill rate given we further employ a one dimensional search on the fill rate to obtain the minimum total inventory cost within a predetermined precision which enjoys polynomial computational complexity

the welfare gain from the introduction of indexed bonds i examine the welfare gain from the introduction of indexed bonds in zero net supply i show that trade in indexed bonds enables investors to reallocate existing economic risks in a mutually beneficial manner the aggregate gain from the introduction of a safe asset is proportional to the variance of the minimum variance portfolio formed from the risky assets and to the heterogeneity of investors risk preferences in an economy with nominal but not indexed bonds the welfare loss from inflation uncertainty is lowest when inflation is most closely correlated with real returns on other assets contrary to popular intuition the introduction of indexed bonds may reduce saving copyright 1993 by ohio state university press

the impact of product substitution on retail merchandising abstract we analyze the impact of product substitution on two key aspects of retail merchandising order quantities and expected profits to perform this analysis we extend the basic news vendor model to include the possibility that a product with surplus inventory can be used as a substitute for out of stock products this extension requires a definition and an approximation for the resulting effective demand under substitution a service rate heuristic is developed to solve the extended problem the performance of this heuristic is evaluated using an upper bound generated by solving the associated lagrangian dual problem our analysis suggests that this heuristic provides a tractable and accurate method to determine order quantities and expected profits under substitution we apply this heuristic to examine how the level of demand uncertainty and correlation and the degree of substitution between products affect order quantities and expected profits under substitutable demand in addition we use the heuristic to better understand the mechanism by which substitution improves expected profits

over indebtedness in microfinance an empirical analysis of related factors on the borrower level summary this paper analyzes the over indebtedness of microborrowers in ghana from a customer protection perspective it measures over indebtedness as a subjective indicator based on loan related sacrifices that borrowers report it finds that male microborrowers are more likely to be over indebted so are borrowers with adverse economic shocks low returns on investment and non productive loan use over indebtedness is lower for borrowers with good debt literacy general financial literacy and numeracy seem insufficient to reduce over indebtedness the paper details the relationship of the above factors to the specific sacrifices borrowers make and suggests that policy measures address the full complexity of the over indebtedness phenomenon

inflation expectations and risk premiums in an arbitrage free model of nominal and real bond yields differences between yields on comparable maturity u s treasury nominal and real debt the so called breakeven inflation bei rates are widely used indicators of inflation expectations however better measures of inflation expectations could be obtained by subtracting inflation risk premiums from the bei rates we provide such decompositions using an estimated affine arbitrage free model of the term structure that captures the pricing of both nominal and real treasury securities our empirical results suggest that long term inflation expectations have been well anchored over the past few years and inflation risk premiums although volatile have been close to zero on average

the newsvendor problem review and directions for future research in this paper we review the contributions to date for analyzing the newsvendor problem our focus is on examining the specific extensions for analyzing this problem in the context of modeling customer demand supplier costs and the buyer risk profile more specifically we analyze the impact of market price marketing effort and stocking quantity on customer demand how supplier prices can serve as a coordination mechanism in a supply chain setting integrating alternative supplier pricing policies within the newsvendor framework and how the buyer s risk profile moderates the newsvendor order quantity decision for each of these areas we summarize the current literature and develop extensions finally we also propose directions for future research

equity bonds and bank debt capital structure and financial market equilibrium under asymmetric information this paper proposes a model of financial markets and corporate finance with asymmetric information and no taxes where equity issues bank debt and bond financing coexist in equilibrium the relationship banking aspect of financial intermediation is emphasized firms turn to banks as a source of investment mainly because banks are good at helping them through times of financial distress this financial flexibility is costly since banks face costs of capital themselves which they attempt to minimize through securitization to avoid this intermediation cost firms may turn to bond or equity financing but bonds imply an inefficient liquidation cost and equity an informational dilution cost we show that in equilib rium the riskier firms prefer bank loans the safer ones tap the bond markets and the ones in between prefer to issue both equity and bonds this segmentation is broadly consistent with stylized facts

the transition from barter to fiat money how did it become possible to exchange apparently valueless pieces of paper for goods this paper provides an equilibrium account of the transition between barter and fiat money regimes the explanation relies on the intervention of a self interested government that must be able to promise credibly to limit the issue of money to achieve credibility the government must offset the benefits of seigniorage by internalizing some of the macroeconomic externalities generated by the issue of fiat money the government s patience and the extent of its involvement in the economy are key determinants of whether the transition can be accomplished copyright 1995 by american economic association

borrowing from pui to pay pom multiple borrowing and over indebtedness in rural thailand summary rural financial markets have grown rapidly in asian emerging market economies thus contributing to economic development and the reduction of poverty at the same time however the level of indebtedness of rural households has increased making households more vulnerable to shocks one of the reasons for rising household debt is the ease of borrowing simultaneously from a growing number of lending institutions this paper addresses two major questions first does borrowing from multiple sources increase rural households risk of over indebtedness second do over indebted rural households refinance their outstanding loans through multiple borrowing running the risk of becoming trapped in a debt cycle employing a dynamic random effects bivariate probit model for a unique set of longitudinal household panel data from northeast thailand this study examines the bidirectional relationship between over indebtedness and multiple borrowing to determine to what extent rural households become trapped in debt cycles on the one hand the results indicate that households in northeast thailand take on multiple loans which further increases their risk of becoming over indebted on the other hand our model results do not confirm the widespread notion that over indebted rural households use multiple loans to refinance unpayable debts

competition in financial innovation this paper examines the incentives to innovate securities provided by frictionless competitive markets with short sales to entrepreneurs in economies with symmetric investor utilities we provide the conditions under which a rm s market value is maximized by a complete nancial structure that is when the mechanism that gives rise to market incompleteness is the one illustrated in the classical example of allen and gale 1991 the foundation for incompleteness in that case is derived from innovation costs and free riding among entrepreneurs for the class of preferences where an incomplete nancial structure maximizes the rms market values markets are incomplete with a probability of one even when innovation is cost free in this sense we provide an alternative to allen and gale s foundation for market incompleteness

a dynamic equilibrium model of search production and exchange we study a general equilibrium model where agents search for production and trading opportunities that generalizes the existing literature by considering a large number of differentiated commodities and agents with idiosyncratic tastes thus agents must choose nontrivial exchange as well as production strategies we consider decreasing constant and increasing returns to scale in the matching technology and characterize the circumstances under which there exist multiple steady state equilibria or multiple dynamic equilibria for given initial conditions we also characterize the existence of dynamic equilibria that are limit cycles equilibria are not generally optimal and when multiple equilibria coexist they may be ranked we analyze comparative statics and find that certain intuitive results do not necessarily hold without restrictions on the stochastic structure