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Macro-modelling, default and money

Goodhart, Charles, Romanidis, Nikolaos, Tsomocos, Dimitrios P. and Shubik, Martin (2019) Macro-modelling, default and money. In: Mayes, David G., Siklos, Pierre L. and Sturm, Jan-Egbert, (eds.) The Oxford Handbook of the Economics of Central Banking. Oxford Handbooks. Oxford University Press Inc, Oxford, UK. ISBN 9780190626198

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Identification Number: 10.1093/oxfordhb/9780190626198.013.22

Abstract

Mainstream macromodels have assumed away financial frictions, in particular default. The minimum addition in order to introduce financial intermediaries, money, and liquidity into such models is the possibility of default. This, in turn, requires that institutions and price formation mechanisms become a modeled part of the process, or a “playable game.” Financial systems are not static, nor are they necessarily reverting to an unchanging equilibrium, but they are evolving processes, subject to institutional control mechanisms, which themselves are subject to sociopolitical development. Process-oriented models of strategic market games can be translated into consistent stochastic models incorporating default and boundary constraints.

Item Type: Book Section
Official URL: https://global.oup.com/academic/product/the-oxford...
Additional Information: © 2019 Oxford University Press
Divisions: Financial Markets Group
Subjects: H Social Sciences > HG Finance
JEL classification: A - General Economics and Teaching > A1 - General Economics > A10 - General
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D50 - General
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E11 - Marxian; Sraffian; Institutional; Evolutionary
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General
G - Financial Economics > G1 - General Financial Markets > G10 - General
Date Deposited: 15 Apr 2019 10:45
Last Modified: 14 Nov 2019 00:32
URI: http://eprints.lse.ac.uk/id/eprint/100472

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