A Dictum for Monetary Theory (2009)
This essay argues that monetary theories should not contain an undefined object labeled money. Among existing theories that do not satisfy that dictum are models which assume that real balances are...
Technology Shocks to Business Cycles ” (Winter 1994), and “Macroeconomics (2009)
This essay briefly reviews the professional life and work of economist S. Rao Aiyagari, who died after a heart attack on May 20, 1997, at the age of 45. Aiyagari is described as “one of the ablest...
Coalition-Proof Trade and the Friedman Rule in the Lagos-Wright Model ∗ (2009)
Tai-wei Hu, John Kennan, Neil Wallace
The Lagos-Wright model a monetary model in which pairwise meetings alternate in time with a centralized meeting has been extensively analyzed, but always using particular trading protocols. Here,...
on ‘Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates (2008)
Bennett T. Mccallum, Neil Wallace, Alex Wolman, Bennett T. Mccallum, Bennett T. Mccallum
This paper explores several issues concerning a possible zero lower bound (ZLB) including its theoretical rationale; the magnitude of effects of low sustained inflation on real interest rates; the...
Liquidity in Asset Markets with Search Frictions ∗ (2008)
Ricardo Lagos, Guillaume Rocheteau, Rob Shimer, Neil Wallace, Pierre-olivier Weill
We develop a search-theoretic model of financial intermediation and use it to study how trading frictions affect the distribution of asset holdings, asset prices, efficiency, and standard measures of...
Coletti, Michele, Grubisic, Angelo, Wallace, Neil, Wells, Nigel
This paper presents the Phase A study of the Solar Electric Propulsion subsystem selected for the ESA European Student Moon Orbiter enhanced microsatellite, performed at QinetiQ under ESA funding. To...
Credit Crunch in a Model of Financial Intermediation and Occupational Choice (2007)
Mingwei Yuan, Christian Zimmermann, Neil Wallace, Cheng Wang, Especially Shouyong Shi
at the Bank of Canada, the Midwest Macroeconomics Conference and the Society for Economic Dynamics for their helpful comments and suggestions. The views expressed in this paper are those of the...
EUROPEAN CENTRAL BANK WORKING PAPER SERIES WORKING PAPER NO � 159 OPTIMAL PUBLIC MONEY * (2007)
Xy Isw Swe, Optimal Public Money, Cyril Monnet, Adam Copel, Larry Jones, Antoine Martin, ...
Non-technical summary 5 1
Emitter Depletion measurement and modeling in the T5&T6 Kaufman-type Ion Thrusters (2007)
Ahmed Rudwan, Ismat M., Wallace, Neil, Coletti, Michele, Gabriel, Stephen
This paper presents some of the aspects of a program undertaken by Qineti Q to characterize and determine the depletion rates and predict life time of its cathode technology. It reports on a long...
New models of old(?) payment questions (2006)
Rivano, Ricardo De Oliveira, Wallace, Neil
Rio de Janeiro
Manjong Lee, Neil Wallace, Tao Zhu
Previous work on the denomination structure of currency treats as exogenous the distribution of transactions and the denominations held by people. Here, by way of a matching model, both are...
Another Example in which Lump-sum Money Creation is Beneficial (2001)
Deviatov, Alexei, Wallace, Neil
A probabilistic version of lump-sum money creation is studied in a random matching model with indivisible money and individual holdings bounded at 2 units. Sufficient conditions are obtained for an...
Another Example in which Lump-sum Money Creation is Beneficial (2001)
Deviatov, Alexei, Wallace, Neil
A probabilistic version of lump-sum money creation is studied in a random matching model with indivisible money and individual holdings bounded at 2 units. Sufficient conditions are obtained for an...
Another Example in which Lump-sum Money Creation is Beneficial (2001)
Deviatov, Alexei, Wallace, Neil
A probabilistic version of lump-sum money creation is studied in a random matching model with indivisible money and individual holdings bounded at 2 units. Sufficient conditions are obtained for an...
Another Example in which Lump-sum Money Creation is Beneficial (2001)
Deviatov, Alexei, Wallace, Neil
A probabilistic version of lump-sum money creation is studied in a random matching model with indivisible money and individual holdings bounded at 2 units. Sufficient conditions are obtained for an...
Knowledge of Individual Histories and Optimal Payment Arrangements”, Federal Reserve (2000)
This article reviews recent work that generalizes a random matching model of money to permit there to be a mix of transactions: some accomplished through the use of tangible media of exchange and the...
TRAINING AND RETENTION OF AIR FORCE AIRMEN: AN ECONOMIC ANALYSIS, (1998)
The responsiveness of the reenlistment rate of Air Force electronic specialists to changes in Air Force remuneration and the degree to which Air Force training is transferable to the civilian economy...
Coinage, Debasements, and Gresham's Laws (1997)
Thomas Sargent Hoover, Thomas J. Sargent, Bruce D. Smith, Francois Velde, Neil Wallace, Warren Weber, ...
this paper, we use a model in which coins circulate by face value or tale to explain this behavior. Modelling circulation by tale elucidates this `debasement puzzle' (a phrase of Rolnick, Weber,...
Narrow banking meets the Diamond-Dybvig model (1996)
Neil Wallace, Barnett Banks, Professor Money
A version of the Diamond-Dybvig model of banking is used to evaluate the narrow banking proposal, the idea that banks should be required to back demand deposits entirely by safe short-term assets. It...
Coinage, Debasements, and Gresham's Laws (1995)
Thomas J. Sargent, Bruce D. Smith, Neil Wallace, Warren Weber
this paper, we use a model in which coins circulate by face value or tale to explain this behavior. Modelling circulation by tale elucidates this `debasement puzzle' (a phrase of Rolnick, Weber,...
The overlapping-generations model Money (1980)
Neil Wallace, Barnett Banks, Professor Money
This study describes a model built on the long-held view that the use of money as a medium of exchange is the result of an absence of double coincidence of wants. The model can account for two of the...
Photocopy.
The term structure of interest rates and the maturity composition of the federal debt. (1964)
Thesis (Ph.D.)--Univ. of Chicago, Dept. of Economics, December, 1964.
A banking model in which partial suspension is best
This paper establishes that partial suspension is an optimal arrangement in an aggregate-risk version of the Diamond-Dybvig (1983) model. The model is a variant of Wallace (1988) in which aggregate...
Knowledge of individual histories and optimal payment arrangements.
This article reviews recent work that generalizes a random matching model of money to permit there to be a mix of transactions: some accomplished through the use of tangible media of exchange and the...
A payments mechanism without Fed involvement and Fed monetary policy without required reserves
Monetary policy
Deposit insurance and bank regulation: a partial equilibrium exposition
Deposit insurance
Interest rates under the U.S. national banking system
Bruce A. Champ, Neil Wallace, Warren E. Weber
According to previous studies, the demand-liability feature of national bank notes did not present a problem for note-issuing banks because the nonbank public treated notes and other currency as...
On simplifying the theory of fiat money
This paper argues that versions of Samuelson/Cass-Yaari overlapping-generations consumption-loans models ought to be taken seriously as models of fiat money. The case is made by summarizing and...
A Matching Model with Bounded Holdings of Indivisible Money.
Taber, Alexander, Wallace, Neil
Recent versions of pairwise random matching models of money with divisible and perishable goods are amended to allow individuals to hold more than one unit of an indivisible asset. The asset...
I argue that monetary economics should be pursued by applying implementation theory to models which contain explicit frictions that make money essential. The argument has two parts. First, I argue...
Samuelson's pure consumption loans model with constant returns-to-scale storage
Consumption (Economics) ; Equilibrium (Economics)
Optimal divisibility when money is costly to produce
There is wide agreement that currency was not available in conveniently small denominations prior to the 19th century. Here, estimates of the costs of providing and maintaining money (coins) in 15th...
Bank investments
Why markets in foreign exchange are different from other markets
This paper, originally published in the fall 1979 Quarterly Review, explains why unfettered markets cannot determine a price at which the currency of one country exchanges for that of another. In...
A suggestion for oversimplifying the theory of money
This paper, originally published in 1988, argues that there is nothing special about government-issued money, that without restrictions of some kind, privately issued money would be a perfect...
A banking model in which partial suspension is best
This paper establishes that partial suspension is an optimal arrangement in an aggregate-risk version of the Diamond-Dybvig (1983) model. The model is a variant of Wallace (1988) in which aggregate...
SPDAs and GICs: like money in the bank?
We argue that changes in the life insurance industry have created a nontrivial moral hazard. We document the industry's shift from sales of life insurance to sales of mainly rate-of-return oriented...
Resolving the national bank note paradox
Bruce Champ, Neil Wallace, Warren E. Weber
During the 1882_1914 period, U.S. national banks could issue circulating notes backed by specified government securities. Earlier attempts to explain yields on those securities by costs of note issue...
Narrow banking meets the Diamond-Dybvig model
A version of the Diamond-Dybvig model of banking is used to evaluate the narrow banking proposal, the idea that banks should be required to back demand deposits entirely by safe short-term assets. It...
Absence-of-double-coincidence models of money: a progress report
This study describes a model built on the long-held view that the use of money as a medium of exchange is the result of an absence of double coincidence of wants. The model can account for two of the...
S. Rao Aiyagari: my student and my teacher
This essay briefly reviews the professional life and work of economist S. Rao Aiyagari, who died after a heart attack on May 20, 1997, at the age of 45. Aiyagari is described as “one of the ablest...
A dictum for monetary theory; This essay argues that monetary theories should not contain an undefined object labeled money. Among existing theories that do not satisfy that dictum are models which...
Knowledge of individual histories and optimal payment arrangements.
This article reviews recent work that generalizes a random matching model of money to permit there to be a mix of transactions: some accomplished through the use of tangible media of exchange and the...
Coalition-Proof Trade and the Friedman Rule in the Lagos-Wright Model
Tai-wei Hu, John Kennan, Neil Wallace
The Lagos-Wright model -- a monetary model in which pairwise meetings alternate in time with a centralized meeting -- has been extensively analyzed, but always using particular trading protocols....
A Suggestion for Oversimplifying the Theory of Money.
This paper reviews various explanations of why monetary assets have a low rate of return. Th e oversimplifying suggestion is that there are no natural explanation s for this low return and,...
Inside and Outside Money as Alternative Media of Exchange.
Cavalcanti, Ricardo De O, Wallace, Neil
We study a random matching model of money in which a subset of people, called bankers, have known histories and the rest, called nonbankers, have unknown histories. Earlier, we showed that if there...
A model of private bank-note issue
A random-matching model (of money) is formulated in which there is complete public knowledge of the trading histories of a subset of the population, called the banking sector, and no public knowledge...
Existence of Steady States with Positive Consumption in the Kiyotaki-Wright Model.
Aiyagari, S Rao, Wallace, Neil
The authors prove the general existence of steady states with positive consumption in an N goods and fiat money version of the Kiyotaki-Wright model by admitting mixed strategies. They also show that...
From 1863-1914, banks in the U.S. could issue notes subject to full collateral, a per-period tax on outstanding notes, redemption of notes on demand, and a clearing fee per issued note cleared...
From 1863-1914, banks in the U.S. could issue notes subject to full collateral, a per-period tax on outstanding notes, redemption of notes on demand, and a clearing fee per issued note cleared...
Modeling Denomination Structures
Manjong Lee, Neil Wallace, Tao Zhu
Previous work on the denomination structure of currency treats as exogenous the distribution of transactions and the denominations held by people. Here, by way of a matching model, both are...
The Thomson-Pierce monthly model: a test for structural change
John H. Kareken, Arthur J. Rolnick, Neil Wallace
Econometric models
Estimating a Cagan-type demand function for gold: 1561-1913
Long times series on production of gold and the value of gold, taken from Jastram’s book The Golden Constant, are used to estimate a Cagan-type demand function that relates the real total value of...
FROM PRIVATE BANKING TO CENTRAL BANKING: INGREDIENTS OF A WELFARE ANALYSIS
An earlier analysis of Cavalcanti and Wallace showing that the set of allocations achievable using outside (government) money is a subset of those achievable using inside (private) money is extended....
Interest Rates Under the U.S. National Banking System
Bruce Champ, Neil Wallace, Warren Weber
According to previous studies, the demand-liability feature of national bank notes did not present a problem for note-issuing banks because the nonbank public treated notes and other currency as...
Search-theoretic models of international currency - commentary
Money ; International finance
Portfolio autarky: a welfare analysis
Portfolio autarky obtains when residents of every country are prohibited from owning real assets located in other countries. Such a regime and a laissez-faire regime, both characterized by free trade...
Samuelson's consumption-loan model with country-specific fiat monies
In this paper, we examine various exchange rate regimes, paying particular attention to what difference the monetary-fiscal policy choices of governments make. The exchange rate may be...
Open-market operations in a model of regulated, insured intermediaries
In “The Inefficiency of Interest-Bearing National Debt,” (JPE, April 1979) we argued that private sector transaction costs are needed in order to explain interest on government debt. It follows...
Monetary policy in the presence of a stochastic deficit
This paper presents a welfare analysis of monetary policy rules that differ as regards the extent to which monetary policy accommodates an exogenous, stochastic deficit. Examples show that a...
A hybrid fiat-commodity monetary system
In this paper I describe a “monetary” system in which backing is provided for the government’s liabilities by way of contingent resort to taxes. The system has some of the features of a...
A suggestion for further simplifying the theory of money
Our suggestion consists of three postulates: assets are valued only in terms of their payoffs, perfect foresight, and complete and costless markets under laissez-faire. Together these postulates...
The real bills doctrine vs. the quantity theory: a reconsideration
Thomas J. Sargent, Neil Wallace
On our interpretation, real bills advocates favor unfettered intermediation, while their critics, who we call quantity theorists, favor legal restrictions on intermediation geared to separate...
A model of circulating private debt
We study the possible specialness of circulating as opposed to noncirculating private securities using models whose equilibria imply the existence of both. The models are pure exchange setups with...
A price discrimination analysis of monetary policy
Monetary policy is analyzed within a model that ignores transaction costs and appeals solely to legal restrictions on private intermediation to explain the coexistence of currency and...
Thomas J. Sargent, Neil Wallace
Commodity money is modeled as one or two of the capital goods in a one-consumption good and one or two capital-good, overlapping generations model. Among the topics addressed using versions of the...
Ricardian equivalence and money dominated in return: are they mutually consistent generally?
Different conclusions about the effects of open market operations are reached even among economists using full employment and rational expectations models. I show that these differences can be...
Rational expectations and the theory of economic policy
Thomas J. Sargent, Neil Wallace
Monetary policy - Mathematical models
Identification and estimation of a model of hyperinflation with a continuum of "sunspot" equilibrium
Thomas J. Sargent, Neil Wallace
This paper constructs a model with two structural equations: the Government budget constraint and a linear version of Cagan’s portfolio balance equation. The model contains a continuum of...
Existence of steady states with positive consumption in the Kiyotaki-Wright model
We prove the general existence of steady states with positive consumption in an N goods and fiat money version of the Kiyotaki-Wright (“On money as a median of exchange,” Journal of Political...
Government transaction policy, the medium of exchange, and welfare
An interpretation of government policy regarding what it accepts in transactions is embedded in a version of the Kiyotaki-Wright model of media of exchange. In an example with two goods and one fiat...
Short-run and long-run effects of changes in money in a random matching model
Using an existing random matching model of money, I show that a once-for-all change in the quantity of money has short-run effects that are predominantly real and long-run effects that are in the...
A model of a currency shortage
Until the mid-19th century, shortages of currency were sometimes serious problems. One common response was to prohibit the export of coins. We use a random matching model with indivisible money to...
Coexistence of money and interest-bearing securities
S. Rao Aiyagari, Neil Wallace, Randall Wright
A random matching model with money is used to study the nominal yield on small denomination, bearer, safe, discount securities issued by the government. There is always one steady state with matured...
Optimal allocations with incomplete record-keeping and no commitment
Narayana R. Kocherlakota, Neil Wallace
We study a random-matching, absence-of-double-coincidence environment in which people cannot precommit and in which there are two imperfect ways of keeping track of what other people have done in the...
A model of regulated private bank-note issue
A random-matching model (of money) is formulated in which there is complete public knowledge of the trading histories of a subset of the population, called banks, and no public knowledge of the...
The role of damage-contingent contracts in allocating the risks of natural catastrophes
R. Anton Braun, Richard M. Todd, Neil Wallace
The distinguishing feature of natural-catastrophe risk is claimed to be aggregate risk. Because such risk is encompassed in the general competitive model, it seems to pose no new theoretical...
Optimal monetary impulse-response functions in a matching model
Brett Katzman, John Kennan, Neil Wallace
The effects on ex ante optima of a lag in seeing monetary realizations are studied using a matching model of money. The main new ingredient in the model is meetings in which producers have more...
Resolving the National Banking System note-issue puzzle
Under the National Banking System, 1863-1914, national banks that deposited sufficient collateral could issue notes provided they paid a tax on notes in circulation: 1 percent per year before 1900...
A model of (the threat of) counterfeiting
A simple matching-model of money with the potential for counterfeiting is constructed. In contrast to the existing literature, counterfeiting, if it occurred, would be accompanied by two distortions:...
The role of independence in the Green-Lin Diamond-Dybvig model
David Andolfatto, Ed Nosal, Neil Wallace
Green and Lin study a version of the Diamond-Dybvig model with a finite number of agents, independence (independent determination of each agent’s type), and sequential service. For special...
Under the U.S. National Banking System (NBS), in effect from 1863--1914, banks with national charters could issue notes under four main restrictions: full collateral in the form of government bonds,...
Fiat Money in the Kiyotaki-Wright Model.
Aiyagari, S Rao, Wallace, Neil
We study versions of the Kiyotaki-Wright (1989) model with fiat money and show that: (1) The use of a low storage cost fiat money may he necessary for specialization and trade, (2) there can be...
Another Example in which Lump-sum Money Creation is Beneficial
A probabilistic version of lump-sum money creation is studied in a random matching model with indivisible money and individual holdings bounded at 2 units. Sufficient conditions are obtained for an...
Another Example in which Lump-sum Money Creation is Beneficial
A probabilistic version of lump-sum money creation is studied in a random matching model with indivisible money and individual holdings bounded at 2 units. Sufficient conditions are obtained for an...
Modeling Small Change: A Review Article
In The Big Problem of Small Change, Sargent and Velde apply a cash-in-advance model to the history of coinage and to contemporary thought about coinage. They assert that their model accounts for...
Optimal Monetary Impulse-Response Functions in a Matching Model
Brett Katzman, John Kennan, Neil Wallace
The effects on ex ante optima of a lag in seeing monetary realizations are studied using a matching model of money. The main new ingredient in the model is meetings in which producers have more...
Short-Run and Long-Run Effects of Changes in Money in a Random-Matching Model.
A random-matching model of money is used to deduce the effects of a once-for-all change in the quantity of money. It is shown that the change has short-run effects that are predominantly real and...
Coalition-Proof Trade and the Friedman Rule in the Lagos-Wright Model
Tai-wei Hu, John Kennan, Neil Wallace
The Lagos-Wright model-a monetary model in which pairwise meetings alternate in time with a centralized meeting-has been extensively analyzed, but always using particular trading protocols. Here,...
A model in which monetary policy is about money
Deviatov, Alexei, Wallace, Neil
Optimal monetary policy is studied in a model with (i) heterogeneity in the degree to which different people are monitored (have publicly known histories); (ii) idiosyncratic shocks that give rise to...
Another Example in which Lump-sum Money Creation is Beneficial
A probabilistic version of lump-sum money creation is studied in a random matching model with indivisible money and individual holdings bounded at 2 units. Sufficient conditions are obtained for an...