| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 956599 | Journal of Economic Theory | 2016 | 30 Pages |
•A model of money, credit, and banking is constructed in which the differential pledgeability of collateral and the scarcity of collateralizable wealth lead to a term premium.•Purchases of long-maturity government debt by the central bank are always a good idea, but for unconventional reasons.•A floor system is preferred to a channel system, as a floor system permits welfare-improving asset purchases by the central bank.
A model of money, credit, and banking is constructed in which the differential pledgeability of collateral and the scarcity of collateralizable wealth lead to a term premium – an upward-sloping nominal yield curve. Purchases of long-maturity government debt by the central bank are always a good idea, but for unconventional reasons. A floor system is preferred to a channel system, as a floor system permits welfare-improving asset purchases by the central bank.
