The I Theory of Money
A theory of money needs a proper place for financial intermediaries. Intermediaries diversify risks and create inside money. In downturns, micro-prudent intermediaries shrink their lending activity, fire-sell assets and supply less inside money, exactly when money demand rises. The resulting Fisher disinflation hurts intermediaries and other borrowers. Shocks are amplified, volatility spikes and risk premia rise. Monetary policy is redistributive. Accommodative monetary policy that boosts assets held by balance sheet-impaired sectors, recapitalizes them and mitigates the adverse liquidity and disinflationary spirals. Since monetary policy cannot provide insurance and control risk-taking separately, adding macroprudential policy that limits leverage attains higher welfare.
We are grateful to comments by discussants Doug Diamond, Mike Woodford, Marco Bassetto, Itamar Drechsler, Michael Kumhoff, Alexi Savov and seminar participants at various universities and conferences. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Markus K. Brunnermeier
As a guiding principle I follow the NBER Research Disclosure Policy: http://www.nber.org/researchdisclosurepolicy.html
To date, no single relationship (other than my salary form Princeton University) has accounted for more than 10 percent of my aggregate annual income in that year.
Significant Remunerated Activities:
Speaking engagements and lectures
ECB, ESRB, Bundesbank (Research Council), Bank of Korea (Keynote presentation), Bank of England, National Bank of Austria, Swiss National Bank, Bank of Japan, Federal Reserve, New York Fed, Bank of Canada, Bank of Chile, Bank of Korea
International financial institution
Swiss Finance Institute, 2012-
No expert testimony for law suits or paid consulting work for private cooperation to date.
Sloan Foundation 2011-12
Guggenheim Fellowship, 2010-11
INQUIRE Europe, Research Grant
Visiting Scholar and Other:
Milton Friedman Institute, visiting scholar 2011
American Economic Review, Journal of Finance, Associated Editorship
Significant Non-Compensated Activities:
American Finance Association: Director
Financial Advisory Roundtable and Monetary Policy Panel, Federal Reserve Bank of New York, 2006 – present
INET Advisory Board Member, 2009 – present