Interpretación y aplicación de las normas

Financial intermediaries trade one-period discount bonds with the households and the monetary authority whose prices are q1,t and two-period bonds with the households

whose price is q2,t. Net amount of funds from households and government is Mt−1−

Qt−q1,tB1c,t, whereMt=

R1

0 Mh,tdh and Qt=

R1

0 Qh,tdh. The first two terms are from

households, and the other term is net supply of one-period bonds from the monetary authority. Since equation (4.1) implies Mt−1 −Qt = q1,tB1H,t + (1 +εt)q2,tB2,t, where

B₁H_,t =R₀1B₁h_,tdhandB2,t=

R1

0 B h

2,tdh, the amount of funds can be rewritten asq1,t(B1H,t−

B₁c_,t) + (1 +εt)q2,tB2,t. These funds become the source of the supply of loanable funds.

Financial intermediaries use these funds to make two types of loan contracts with intermediate goods producing firms: the short-term loan contracts with which firms finance the wage bill with gross interest rate RN,t, and the long-term loan contracts

with which firms finance the whole cost of new projects launched at timet with gross interest rateRA,tfor two periods. The total demand for loans by firms becomesDt+At

where Dt = R1 0 Di,tdi = WtNt, At = R1 0 Ai,tdi = ϕ2s2,tPt +ϕ1s2,tEtPt+1 + t, and s2,t = R1 0 s i

2,tdi. Then, the resource constraint is given by

Dt+At=q1t(B1H,t−B c

1,t) + (1 +εt)q2tB2,t (4.38)

For the sake of simplicity, financial intermediaries are assumed to match maturi- ties between assets and debts. That is, financial intermediaries use short-term loan

contracts for lending money to firms with funds from selling short-term bonds, and they use long-term loan contracts for lending money with funds from selling long-term bonds. This assumption can be justified from the “matching principle” of the cor- porate debt maturity theory which is empirically supported in many studies, such as Emery (2001) and Stohs and Mauer (1996) for U.S. data, and Ozkan (2002) for UK data, among others. It states that firms should match the maturity of their liabilities to their asset maturity because if debt maturity is shorter than asset maturity, firms may not have enough cash on hand to repay the principal at the due date. Moreover, if the maturity of debt is longer than asset maturity, then cash in-flow from holding assets stops, while firms still have unpaid debt obligations. By matching maturities, firms can reduce these risks and expected costs of financial distress (Stohs and Mauer 1996). The matching principle can be applied to financial intermediaries because their main purpose is to seek profit as private firms do. The loan market separation together with the perfect competition in the loan markets guarantee that we can identify the equilibrium amount of short- and long-term borrowings. Now, each resource constraint becomes

Dt=q1,tB1,t (4.39)

At= (1 +εt)q2,tB2,t (4.40)

where B1,t denotes the supply of one-period bonds by financial intermediaries. The

left-hand sides of (4.39) and (4.40) are the supplies of short- and long-term funds, respectively, and the right-hand sides represent the sources of funds.

At the end of period t, financial intermediaries receive payoffs (principal plus inter- est) from the short-term loan contracts made at the beginning of the period and from the long-term loan contracts made at the beginning of periodt−1. After reimbursing

all maturing bonds B1,t and B2,t−1 to households (and to the monetary authority if

B₁c_,t < 0), financial intermediaries distribute their end-of-period net cash position to the household as a dividend DIVt given by

DIVt=RN,tDt+RA,t−1At−1−(B1,t+B2,t−1).

Financial intermediaries maximize the present value of the profit stream subject to (4.39) and (4.40) with respect to Dt, At, B1,t, and B2,t given the perfect loan market

competition, i.e., given RN,t and RA,t. This can be expressed as

Et

∞ X

j=0

βjΛt+jDIVt+j

Again, the discount factor, Λt, is defined the same way as in the firms’ problem.

The first-order conditions result in the following two equations.

RL,t = _q1

1,t (4.41)

RA,t= _(1+ε1_t)q2,t (4.42)

Financial intermediaries earn zero profit on funds received from selling one- and two- period bonds to the household7 (Christiano and Eichenbaum 1995, Dotsey and Ireland

1995). From (26), (27), (29), and (30), the zero profit conditions become

RN,tDt=B1,t (4.43)

RA,tAt=B2,t (4.44)

for all periodst. The left-hand sides of (4.43) and (4.44) represent the cash inflows from

lending money in the short and long term to the firms at the end of the period t and t+ 1, respectively. And the right-hand sides are cash outflows at the end of the period t and t+ 1, respectively, to the household from selling bonds. Hence, the dividend to the households at the end of periodt becomesDIVt= 0.