Publication Type

PhD Dissertation

Version

publishedVersion

Publication Date

5-2026

Abstract

This dissertation comprises three papers that use money search models to revisit the distributional welfare costs of inflation, study the optimal design of a central bank digital currency (CBDC), and investigate the role of liquidity and monetary policy in initial investment and capital reallocation in secondary markets.

The second chapter develops a micro-founded general equilibrium model of payments to revisit the distributional welfare costs of inflation. We consider different cost structures incurred by merchants when accepting cash and deposits. In equilibrium, there exists a cutoff for buyers’ money holdings, above which card payments are accepted by merchants. We calibrate the model to the U.S. economy using data from 2017 to 2021. The counterfactual analysis shows that, for the bottom 20 percent of consumers ranked by consumption expenditure, reducing inflation from 10 percent to 0 percent generates a welfare gain slightly above 1 percent for the bottom 10 percent of consumers and 0.8 percent for the next 10 percent. The gain is much smaller for the rest of the distribution, averaging 0.008 percent.

The third chapter studies how introducing a central bank digital currency with a holding limit affects equilibrium allocations and welfare in an environment where digital currency competes with bank deposits. Imposing a limit on households’ digital currency holdings may not be optimal, depending on other design features. I show that when the subsidy and the interest rate on the digital currency are set properly, it is optimal to impose no limit. However, imposing a limit can improve welfare under alternative designs.

The fourth chapter investigates the interaction between liquidity constraints and the choice of investment in new or second-hand capital when there are search and matching frictions in the market for funds and in the market for used capital. The extent of funding frictions impacts the ability to invest in new capital and therefore impacts the demand for used capital, while conditions on the market for used capital (ease of trade and price) matter for the ability to obtain funding for new capital. The chapter also investigates the impact that monetary policy has on the purchase and reallocation of capital.

Degree Awarded

PhD in Economics

Discipline

Economics | Finance

Supervisor(s)

JACQUET, Nicolas Laurent

First Page

1

Last Page

120

Publisher

Singapore Management University

City or Country

Singapore

Copyright Owner and License

Author

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