Citation
Dixit, Shiv. (2023). Optimal Cash Management under Imperfect Monitoring .
Copyright
2023
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Abstract
I study efficient thresholds on cash transfers in a dynamic contracting model where income is harder to monitor when there is more cash usage. To motivate the analysis, I examine the uniform limits on cash withdrawals imposed following the recent demonetization in India. I document substantial heterogeneity in the effect of these limits on consumption expenditure across income and wealth distributions. This finding suggests that non-discriminatory trans- fer limits are too blunt to insure against idiosyncratic income risk. I show that sharper in- struments–transfer limits contingent on the history of reported household income–can reduce inequality and yield substantial welfare gains.
Professor Dixit received his Ph.D. in Economics from the University of Minnesota. He is a Macroeconomist who uses tools in dynamic contracting theory to address issues in Public Finance, Monetary Economics and Development Economics. His dissertation studied how contractual frictions interact with the amount of risk people choose to bear; rules that a government can impose on itself to discipline time-inconsistent behavior; and efficient demonetization policies. Professor Dixit previously worked at the Federal Reserve Bank of Minneapolis and the International Monetary Fund. Prior to his Ph.D., he graduated from the University of Michigan—Ann Arbor, with concentrations in Economics and Mathematics.
Shiv Dixit