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In defense of a basic approach

Cass, David and Shell, Karl (2011) In defense of a basic approach. In: The Collected Scientific Work of David Cass. International Symposia in Economic Theory and Econometrics. Vol.2. No.21. Emerald Group Publishing , United Kingdom, pp. 251-260. ISBN 0857246437.

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Government debt (in its various forms) can serve in a host of roles for the private sector-as a store of value, as a convenient means for transactions, as an exclusive vehicle for tax payments, and so forth. These various roles are generally closely interdependent and strongly influenced by the particular conventional and institutional arrangements in an economy. One of them, however, is crucial to all the others: If money and bonds do not serve as a value store, then they cannot serve any other useful function. Our current research focuses on the role of money and bonds as a store of value-not because we are necessarily persuaded that this is the most interesting aspect of the paper assets created by the government, but rather because we are firmly convinced that this basic function must be well understood before we can begin to understand any of their more complicated functions.

Item Type:Book Section
Additional Information:© 2011 Emerald Group Publishing. These reflections were set down several months after the Federal Reserve Bank of Minneapolis conference on “Models of Monetary Economies." Their proximate cause was the generally negative reaction by the conference participants to Neil Wallace's forthright assertion of the importance of consumption loan or overlapping generations models for understanding monetary phenomena in a private, market economy. We support Wallace's basic position. Indeed, we have for some time believed (and preached) that these models offer an intellectually attractive framework for studying many aspects of decentralized intertemporal allocation-provided, of course, that some care is taken to distinguish between fundamental or inherent features and convenient or provisional simplifications. This opportunity to articulate our position is also a natural forum for us to air our misgivings about various currently fashionable prejudices in monetary and macroeconomic theory and lo present our views about various more constructive alternatives for future development. The collaboration underlying this paper has taken place over several years, encompassing both Shell’s visit as a Guggenheim Fellow at CEPREMAP during 1977-78 and Cass's visit as a Sherman Fairchild Distinguished Scholar at Caltech during 1978-79. The paper itself represents an effort to lay out the general methodological position motivating a series of specific analytical studies of overlapping generations models. It thus constitutes part of a more extensive project being underwritten by a grant to the Center for Analytic Research in Economics and the Social Sciences (at Penn) from the National Science Foundation. We are grateful to all these institutions for their support and encouragement. Formerly SSWP 282.
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Center for Analytic Research in Economics and the Social SciencesUNSPECIFIED
Series Name:International Symposia in Economic Theory and Econometrics
Issue or Number:21
Record Number:CaltechAUTHORS:20171130-171053147
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83619
Deposited By: Jacquelyn Bussone
Deposited On:01 Dec 2017 18:08
Last Modified:03 Oct 2019 19:08

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