Title: Strategic Money and Credit Ledgers (video recording)

Abstract: Can a digital “bills-of-exchange” system be established? We show that a sufficiently dominant trading platform can and will set up a ledger that allows firms to purchase inputs by issuing tradable IOUs, which then serve as a savings vehicle and medium of exchange. The platform can incentivize the use of the ledger, and enforce repayment by threatening exclusion from future trade, something that a stand-alone ledger cannot. In GE, this lowers the equilibrium interest rate, but also increases the platform’s rent extraction. A public payment alternative that is competitive, but not too competitive, improves output and consumption.  

Speaker bio: https://markus.scholar.princeton.edu/biocv