Transaction Asset Shortages

AIER Sound Money Project Working Paper No. 2018–08

32 Pages Posted: 17 Apr 2017 Last revised: 8 Jan 2018

See all articles by David Beckworth

David Beckworth

Mercatus Center at George Mason University

Joshua R. Hendrickson

University of Mississippi

Date Written: April 14, 2017


Over the course of U.S. history there have been a small number of occasions in which aggregate nominal spending has declined, the most recent of which occurred during the recession that began in December 2007. Coincident with these observed declines in nominal spending are declines in the quantity of transaction assets and real output, where the former are defined as financial assets that also serve as a medium of exchange. We argue that the co-movement evident in the data is the result of transaction asset shortages. In particular, we develop a model in which transaction asset shortages result from shocks to the resalability, or liquidity, of privately produced assets. We estimate the model using Bayesian techniques. The estimated impulse response functions show evidence of the co-movement between nominal GDP, real GDP, and the supply of transaction assets that are known to occur during declines in aggregate nominal spending. We also show that the decline in nominal GDP that occurred in 2008 coincides with a large, sudden decline in the resalability of private assets.

Keywords: transaction assets, safe assets, asset shortages, Bayesian estimation, Divisia monetary aggregates

JEL Classification: E32, E40, E41

Suggested Citation

Beckworth, David and Hendrickson, Joshua R., Transaction Asset Shortages (April 14, 2017). AIER Sound Money Project Working Paper No. 2018–08, Available at SSRN: or

David Beckworth

Mercatus Center at George Mason University ( email )

3434 Washington Blvd. 4th Floor
Arlington, VA 22201
United States


Joshua R. Hendrickson (Contact Author)

University of Mississippi ( email )

Oxford, MS 38677
United States

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