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Full-Text Articles in Social and Behavioral Sciences
Credit Cards And Inflation, John Geanakoplos, Pradeep Dubey
Credit Cards And Inflation, John Geanakoplos, Pradeep Dubey
Cowles Foundation Discussion Papers
The introduction and widespread use of credit cards increases trading efficiency but, by also increasing the velocity of money, it causes inflation, in the absence of monetary intervention. If the monetary authority attempts to restore pre-credit card price levels by reducing the money supply, it might have to sacrifice the efficiency gains. When there is default on credit cards, there is even more inflation, and less efficiency gains. The monetary authority might then have to accept less than pre-credit card efficiency in order to restore pre-credit card price levels, or else it will have to accept inflation if it is …
Inflationary Equilibrium In A Stochastic Economy With Independent Agents, John Geanakoplos, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Inflationary Equilibrium In A Stochastic Economy With Independent Agents, John Geanakoplos, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Cowles Foundation Discussion Papers
We argue that even when macroeconomic variables are constant, underlying microeconomic uncertainty and borrowing constraints generate inflation. We study stochastic economies with fiat money, a central bank, one nondurable commodity, countably many time periods, and a continuum of agents. The aggregate amount of the commodity remains constant, but the endowments of individual agents fluctuate “independently” in a random fashion from period to period. Agents hold money and, prior to bidding in the commodity market each period, can either borrow from or deposit in a central bank at a fixed rate of interest. If the interest rate is strictly positive, then …