Beschreibung:
A simple monetary model is constructed to study the role of collateral requirement of credit settlement as a new source of money demand. Collateral requirement induces economic individuals to hoard more cash and makes cash in circulation scarce. In equilibrium, the timing of posting collateral deposits in terms of cash distorts the demand for money for other purposes. Payment policy involves the management of collateral requirement. It is optimal to relax the collateral requirement ratio. Monetary policy involves open market operations. It is optimal to supply more cash. The Friedman rule may not be optimal