Topic：Collateral-Constrained Entrepreneurs and Collateral-Constrained Banks: Implications for Conventional and Unconventional Monetary Policy

Speaker：ZENG Zhiqiong，Professor of Zhongnan University of Economics and Law

Site：B247

Time：3pm，June 11，2018

Abstract：We construct a model that integrates collateral-constrained entrepreneurs and collateral-constrained banks into a search-theoretic framework of money with multiple liquid assets. In the model, deposit claims coexist with currency as means of payment in decentralized trade. There are banks that play dual roles——providing liquidity insurance and undertaking financial intermediation. In the model, deposit claims on banks have to be backed by imperfectly pledgeable bank assets. These assets include bank loans which have to be collateralized by again, imperfectly pledgeable entrepreneurial capital, giving rise to a collateral chain across the realms of entrepreneurial finance and bank finance. We highlight the linkages between the centralized market and decentralized market——both an interest-rate linkage and a collateral linkage, and study the transmission mechanisms of conventional and unconventional monetary policy measures. The optimal monetary policy problem is then analyzed using the primal approach.